A Nonlinear ARDL Model of Inflation Dynamics in the Philippine Economy

The dependent variable of this study is the inflation rate based on the consumer price index (CPI) measured at the 2012 constant price obtained from the Philippine Statistical Authority (PSA). The international crude oil price (wop) is the simple average of three spot prices: Dated Brent, West Texas Intermediate, and the Dubai Fateh. The Crude oil unit is U.S. Dollar per barrel secured from World Bank as published by Index Mundi. Macroeconomic variables are also included in the model, such as real effective exchange (Ex) rate (Peso per U.S. Dollar) weighted average rate under the Philippine Dealing System (PDS) obtained from the Banko Sentral ng Pilipinas (BSP). The log value of the gross domestic product (lnq) taken from the PSA was used as a proxy to the demand condition of the economy; it is measured in a million Philippine peso at constant 2018 prices. The short-term interest rate (IntR) -91-day Treasury bill rate from the BSP was used as the monetary response variable to control oil shocks' inflationary effect.