Money and uncertainty in the Philippines: A Friedmanite Perspective

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.Friedman, GARCH, T‐GARCH, Bai‐and‐Perron technique, band pass filter

Stereotypic wage and accentuation effect

The paper extends the work of Akerlof and Kranton [2004] on social identity and economics of organization to an adverse selection framework. The inclusion of social identity in the principal’s problem alters the contracts offered to the agents. A pooling contract is a Pareto optimal contract when the agent attaches greater weight on conformity to ideal behavior prescribed by group membership. Precisely how this pooling contract is characterized depends on the ideal behavior of the agent. This result is generalized when social interaction and social influence among members of different groups are allowed. Using the concept of accentuation effect in social psychology, the model provides theoretical justifications for the existence of a representative (or stereotypic) wage for a given social category.stereotypic wage, accentuation effect, adverse selection

Money and uncertainty in the Philippines: A Friedmanite Perspective

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

Money growth and velocity with structural breaks: Evidence from the Philippines

This paper aims to test the Friedmanite proposal on the link between the velocity of money demand and money growth. We base our work on the Philippines as its monetary policy has been subject to sharp swings since the 1980s. We use a method that takes into account possible structural breaks in the velocity of money demand and a GARCH model to evaluate the variability of money growth. We apply Granger causality tests to confirm the Friedmanite hypothesi