ANALYZING TRENDS AND DETERMINANTS OF INFLATION IN PHILIPPINES FROM 1994 TO 2023
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Universiti Malaysia Sarawak (UNIMAS)
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This study examines the trends and determinants of inflation in the Philippines from 1994 to 2023, focusing on four key variables: interest rate, exchange rate, gasoline price, and money supply (M2). Using time series econometric techniques such as the Augmented Dickey-Fuller (ADF) test, Johansen Cointegration Test, and Vector Error Correction Model (VECM), the analysis investigates both short-run and long-run relationships between these variables and inflation. The findings reveal that in the long run, gasoline prices and money supply have a strong and positive influence on inflation. Meanwhile, interest rates and exchange rates show less consistent and weaker effects, meaning their impact on inflation varies depending on the time period and is not as strong as the other variables. In the short run, exchange rate fluctuations show immediate influence, suggesting the economy's vulnerability to external shocks. These results highlight the importance of managing liquidity and monitoring global fuel prices to maintain inflation stability in the Philippines. The findings offer useful insights for policymakers in designing targeted monetary and fiscal interventions.