ABE International Business College Iloilo

Bachelor of Science in Business Administration

The Inflation
Rate
in the
Philippines
 ABE International Business College Iloilo

Bachelor of Science and Business Administration

Chapter I

Background of the Study

Inflation in a general manner affects the behavior of every person. Inflation is the rate
of increase in prices over a given period of time.(Amadeo,K.2018)Inflation is typically a broad
measure, such as the overall increase in prices or the increase in the cost of living in a country.
Biggest cause of inflation typically, inflation results from an increase in production costs or an
increase in demand for products and services. There are two main causes of inflation which are
the demand-pull and cost-push. Both are responsible for a general rise in prices in an economy,
but each works differently to put pressure on prices. Demand-pull conditions occur when
demand from consumers pulls prices up, while cost-push occurs when supply costs force prices
higher. Inflation is being handled and managed by the Bangko Sentral ng Pilipinas with the
main goal of limiting and normalizing the rate of inflation in order to not affect the living of the
Filipino people and for the economy to run smoothly. Section 3 of Republic Act 7563 or the
New Central Bank Act, signed in 1993, stated that the BSP primary objective is "to maintain
price stability conductive to a balanced and sustainable growth of the economy.Individuals and
families on a fixed income, holding variable interest rate debt are hurt the most by inflation.
Inflation in the Philippines accelerated to a new 14-year high of 8.7% in January, driven by rising
utility, housing and food costs.

Statement of the problem

Specific Statement of the problem:

- Determine the inflation rate

-Determine the main cause of high inflation

-Determine who is responsible for inflation in Philippines

-Determine the bad effects of inflation

-Determine how to solve inflation problems

-Determine who gets affected by inflation

Significance of the Study

This study will be undertaken to find out the number of people who get affected by
inflation in the Philippines.

Scope and Delimitation of the Study

This study aimed to investigate the family affected by inflation. Also, this study learns to
identify on how the researchers can develop and ask about the situation experienced during
inflation.

Definition of Terms
Inflation - is the rate of increase in prices over a given period of time. Inflation is typically a broad
measure, such as the overall increase in prices or the increase in the cost of living in a country.

Family - is a group of two or more persons related by birth, marriage, or adoption who live together.

Fixed Income - is an investment approach focused on preservation of capital and income. It typically
includes investments like government and corporate bonds, CDs and money market funds.

Rate - A quantity, amount, or degree of something measured per unit of something else.

Increase- become or make greater in size, amount, intensity or degree.

 Demand pull- relating to or denoting inflation caused by an excess of demand over supply

Necessity- the fact of being required or indispensable

Economy- the wealth and resources of a country or region, especially in terms of the production and
consumption of goods and services
 ABE International Business College Iloilo

Bachelor of Science and Business Administration

Chapter II

Related Literature
The Encyclopaedia Britannica states that “inflation is generally thought of as an inordinate rise in
the general level of prices” (1988: 310). The New Palgrave: A dictionary of Economics (1987) quotes
Laidler and Parkin (1975: 741) to define inflation as “a process of continuously rising prices, or
equivalently, of a continuously falling value of money” (1987: 832). Moreover, “since there are many
different ways of measuring prices, there are also many different measures of inflation. The most
commonly used measures in the modern world are the percentage rate of change in a country’s
Consumer Price Index or in its Gross National Product deflator” (New Palgrave: A dictionary of
Economics, 1987: 832).

The literature on models of inflation is too voluminous to review in depth here. For the purposes
of this paper, we are less interested in the dynamic interactions of inflation and other variables over the
business cycle and more interested in the determination of the rate of inflation in the long run. Driffill,
Mizon and Ulph (1990) and Woodford (1990) provide surveys of the theoretical and empirical literature
on the costs and benefits of inflation. Unfortunately, the only conclusion that comes close to achieving a
consensus is that inflation variability per se is harmful and that central banks should stabilize the
inflation rate to the extent that they can without inducing costly variability in other economic variables.
No consensus exists on the optimal steady-state rate of inflation.

Fischer (1990) surveys the literature on the institutional framework of monetary policy and the
determination of the long-run inflation rate. The treatment is purely theoretical and focuses on the issue
of ‘rules versus discretion’. A basic conclusion is that a pure rule-based policy has not existed since the
Gold Standard, and many would argue that even under the Gold Standard there was a substantial
discretionary aspect to monetary policy. One drawback of discretionary policy setting is that no one has
designed an institutional framework that indisputably avoids the potential inflationary bias created by
the time inconsistency problem.[4]
 More recently, attention has focused on the adoption of explicit inflation targets by a number of
central banks. Walsh (1995) discusses the circumstances under which explicit inflation targets and
enforcement clauses in the central bank governor's contract are optimal. For a brief review of the
international policy debate, see International Monetary Fund (1996). At this stage it appears to be too
soon to conclude much about the desirability and durability of inflation targeting.

Empirical analyses of the long-run properties of inflation rates have generally occurred in the
context of the real interest rate literature. See, for example, Rose (1988) and Mishkin (1992). Using data
from the entire postwar period, one cannot reject a unit root in inflation for most industrial countries
using standard Augmented Dickey-Fuller tests. However, for many countries one can reject non-
stationarity of the inflation rate in certain subsamples.

Hassler and Wolters (1995) and Baillie, Chung and Tieslau (1996) use the Phillips-Perron test and
the KPSS test on postwar monthly inflation rates and reject both a unit root and stationarity for several
countries. To reconcile these conflicting findings they turn to models with ‘fractional integration’ and
find that they are strongly supported by the data. Fractional integration allows for slow mean reversion
that does not decay as rapidly as the asymptotically exponential pattern associated with standard
autoregressive-moving average models. This slow mean reversion is termed ‘long memory’.

Other researchers have sought to explain the apparent non-stationarity of inflation as the result
of regime shifts in the mean and variability of the inflation rate. Chapman and Ogaki (1993), Bai and
Perron (1995) and Hostland (1995) find significant evidence of regime shifts in US, UK, and Canadian
inflation. Evans and Lewis (1995), Ricketts and Rose (1995) and Simon (1996) estimate Markov-switching
models for inflation in the G7 countries and Australia. At least two regimes are significant in all countries
except Germany.

Occasional shifts in the inflation regime are more economically interpretable than fractional
integration. Moreover, if there are only a small number of regimes that cycle back and forth, or if the
regime-generating process is stationary, inflation rates will appear to have long memory, which is
consistent with the fractional integration literature.

ABE International Business College Iloilo

 Bachelor of Science and Business Administration

Methodology

Research Respondents
In this study the researchers will utilize three to five families who have a fixed income and
are affected by inflation.

Data Gathering Procedure

1) Determining the place where the respondents will be taken from.

2) Sending letters of permission.

3) Approval

4) Meeting the respondents.

5) And before the actual interview, the researcher will go over the informed consent form with
each respondent and make sure that they understand what they were agreeing to following
this explanation,each respondent will be asked to sign the consent form acknowledging they
understood the study.

6) Asking for a demographic profile.

7) When the interview is finished, the researcher will provide snacks for the respondents.

Ethical Consideration
In this study, the researcher will ask permissions from a random family. They will be
subjected to voluntary participation and informed consent to guarantee that they will choose to
participate out of their own free will and that they will be fully informed regarding the
procedures of the research study and any potential risks.

Data Analysis
A phenomenological analysis of the interview transcripts will be conducted to develop
a textural description of the experiences of the respondents (what they experienced), a
structural description of their experience ( how it was experienced in terms of conditions,
situation or context), and a combination of both to convey an overall essence of the
experiences (Creswell,2007).

Research Environment
The study will be conducted at Sitio Kinambud, Janiuay, Iloilo, Philippines.

Research Design
This kind of study will be utilized as the researcher will seek to understand the effect of
inflation in the family who have a fixed income. Furthermore,it will allow the researcher to
delve into the perceptions,perspectives,understanding, and feelings of those people who have
actually experienced.

Research Instrument
 In this study, there will be a two-part research instrument to be used. Part one of which
will determine the demographic profile of one member of the family who are affected by
inflation in terms of age,sex, educational attainment,civil status, economic status and religion.
The second part of the research instrument will be the interview questions.

References

https://www.rba.gov.au/publications/rdp/1997/9701/literature-
review.html

https://www.imf.org/external/pubs/ft/fandd/basics/inflat.htm

https://www.imf.org/en/Publications/fandd/issues/Series/Back-to-
Basics/Inflation

https://www.imf.org/external/pubs/ft/fandd/basics/inflat.htm

https://europe.pimco.com/en-eu/resources/education/understanding-
inflation

https://www.investopedia.com/articles/07/
consumerpriceindex.asp
Inflation and Consumer Spending | U.S. Department of Labor