Money and uncertainty in the Philippines: A Friedmanite Perspective

Assad L. Baunto (1) , Christian Bordes (2) , Samuel Maveyraud (3) , Philippe Rous (4)

1 UP System - University of the Philippines
2 CES - Centre d'économie de la Sorbonne
3 GREThA - Groupe de Recherche en Economie Théorique et Appliquée
4 LAPE - Laboratoire d'Analyse et de Prospective Economique

This paper aims to provide a unified theoretical framework of the two hypotheses proposed by Friedman: (i). increased variability of money supply results in the decline of income velocity of money and (ii) high inflation leads high variability of inflation which reduces potential output growth. This paper also provides empirical investigation to validate Friedman's hypotheses using Philippine data. The Philippine economy experienced persistently higher and more variable inflation rate and weaker macroeconomic performance relative to other Asian countries, and these characteristics provide ample opportunity to evaluate Friedman's proposals at work. Utilizing original methodologies (e.g. band‐pass filter), our findings validate both proposals.

Mots clés: Friedman; GARCH; T‐GARCH; Bai‐and‐Perron technique; band pass filter

Domaines: Economies et finances

Assad L. Baunto, Christian Bordes, Samuel Maveyraud, Philippe Rous. Money and uncertainty in the Philippines: A Friedmanite Perspective. 2007. ⟨hal-00308663⟩