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.
interest rate, inflation rate, monetary policy, monetary economics
This paper is presented in the 3rd International Conference on Multidisciplinary Industry and Academic Research.
Martin Roy B. Base. Master of Arts in Economics, MEAL Officer, Save the Children Philippines
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Cite this article:
Base, M.B. (2022). Reverse repurchase rate on selected monetary policy indicators: A vector autoregression. International Journal of Academe and Industry Research, 3(4), 83-106. https://doi.org/10.53378/352936
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