In a report, the think tank of the House of Representatives said money supply and inflation are deeply intertwined based on the evidence presented.
“Policymakers committed to managing inflation are thus advised to carefully consider the risks inherent in insisting on expansionary monetary policy, particularly in the near future,” the CPBRD said.
It said that further growth in the financial system’s money supply could aggravate existing inflationary pressures and heighten risks of stagflation, or the phenomenon where a country experiences slow economic growth, high unemployment rates and elevated inflation.
The report explained that increases in money supply have led to higher inflation rates as there exists a significant and positive relationship between changes in money supply three quarters ago and the most recent change in the consumer price index.
“It is worth emphasizing that quarter-to-quarter changes in the money supply are measured in millions of pesos. This result suggests that expansionary monetary policy elicits a delayed but significant effect on prices,” the CPBRD said.
This story is from the July 07, 2024 edition of The Philippine Star.
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This story is from the July 07, 2024 edition of The Philippine Star.
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