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Industry & Academic Research Review

ISSN 2719-146X (Print) 2719-1478 (Online)

An Analysis of Reverse Repurchase Rate on Selected Monetary Policy Indicators: A Vector Autoregression

Martin Roy B. Base
Volume 3 July 2022

This study evaluated the effectiveness of the reverse repurchase (RRP) rate as the main monetary policy instrument of the Bangko Sentral ng Pilipinas in affecting selected monetary policy indicators, particularly output gap, inflation, and nominal exchange rate, through a modified New Keynesian monetary policy model using vector autoregression (VAR). The results showed that changes in the RRP rate affects output gap, inflation, and nominal exchange rate, albeit not statistically significant. In addition, the “price puzzle” was seen in the results. This pertains to an increase in inflation after monetary policy contraction which is in contrast with the standard monetary policy theory.

monetary policy, interest rate, monetary economics, macroeconomics

This paper is presented in 3rd International Conference on Multidisciplinary Industry and Academic Research (ICMIAR)

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