Philippines: Selected Issues

This selected issues paper provides background on evolution, highlight the rationale behind the key changes, describe the most important extensions and their implications, and to then present several policy applications, which played a part in informing the 2023 Article IV discussions with the Philippine authorities. Analysis demonstrated, the extended Philippines quantitative model for the integrated policy framework (PHL QIPF) framework is capable of generating baseline forecasts, analyzing risks around them and contributing to the policy debate beyond the narrow purview of optimal responses to capital flow shocks. Since it can now be estimated on non-detrended data, and since detailed forecast decompositions are readily available, the PHL QIPF can be used as a handy tool to summarize the Philippine economy’s ‘initial conditions’ and it can also provide a read-out on the empirical relevance of various frictions. There are a number of avenues for further work. Most immediately, to allow for sharper inferences both the set of observables as well as the set of estimated parameter values could be extended, paying close attention to the quality of the underlying data and continuing to closely monitor the implications for the transmission mechanism.