THE Bangko Sentral ng Pilipinas (BSP) will roll out in 2025 an upgraded economic modeling tool to enhance policy evaluation and decision-making with better, forward-looking projections.
“The BSP is an inflation targeting central bank … part of the process is the conduct of regular assessment of economic developments and outlook, and their implications for monetary policy,” BSP economic research director Dennis Bautista said in a briefing on Monday.
As the country’s central bank seeks to improve its forecasts and monetary policy, Bautista said they have crafted the Policy Analysis Model for the Philippines version 2.0 (PAMPh2.0). This updated model will incorporate fiscal and macroprudential factors, labor dynamics and shock management to enhance policy decisions and evaluations.
PAMPh2.0 is touted to help policymakers navigate the complex macro-financial environment, think about the trade-offs between different policy tools and support better coordination among various policies, leading to improved cooperation within the central bank.
The BSP, in the past years, has been relying on a multi-equation econometric model (MEM) for its monetary policies and decisions.
Real-time
While there are no issues with the current model, BSP Deputy Governor Francisco Dakila explained that PAMPh is more detailed, which can be used to “give more explicit input on the monetary policy stance. It’s producing an entire path of the policy rate. So, it’s not really a case that you have problems with the old model, but this is an enhancement.”
Bautista added that PAMPh2.0 would help policymakers assess their decisions in real-time.
Dakila noted that while they will retain the MEM, it will no longer serve as the baseline model.
“When we’re satisfied with PAMPh, it will be shifted to this new baseline. The MEM will then be one of the so-called satellite models because PAMPh is quarterly,” Dakila said.
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