E. Rodriguez Jr.

High School
Senior High School
Mayon ave. Brgy N.S Amoranto, Quezon City

“THE PERCEIVED EFFECTS OF INFLATION IN RELATION

TO THE MINIMUM CONSUMERS' INCOME IN THE
PHILLIPINES”

In partial fulfillment of the requirements in Practical Research 1

(QUALITATIVE RESEARCH)

SUBMITTED BY:
Neri, Karl Gabrielle E.
Lopez, Jasmira Aubrey D.
Marquez, Myisha Cassandra D.
Gutierrez, Kathryn
Priagola, Christian A.
Lascuna, Jamieleen D.

SUBMITTED TO:
MR. MICO ACEBEROS
1/22/23
 TABLE OF CONTENTS

Chapter 1: The Problem and Its Background

1. Introduction ………………………………………………………………………
2. Statement of the Problem …………………………………………………..
3. Research Questions …………………………………………………………..
4. Purpose of the Study ………………………………………………………….
5. Significance of the Study …………………………………………………….
6. Scope and Delimitations ……………………………………………………..

Chapter 2: Review of Related Literature & Synthesis

1. RRLAS ………………………………………………………………………………
2. Conceptual Framework ………………………………………………………
3. Definition of Terms ……………………………………………………………

Chapter 3: Methods
1. Introductory Paragraph ………………………………………………………
2. Research Design ……………………………………………………………….
3. Population and Sample ………………………………………………………
4. Sampling Procedures …………………………………………………………
5. Data Gathering / Data Collection ………………………………………..
6. Instrumentation ……………………………………………………………….
7. Data Analysis …………………………………………………………………..
8. Assumptions ……………………………………………………………………
 CHAPTER 1

THE PROBLEM AND ITS BACKGROUND

1.0 Introduction

This research is about Inflation, which is the rise in prices that can be

translated as the decline of purchasing power in a certain period of time.

Inflation also refers to a broad rise in the prices of goods and services

across the economy. The Philippines Statics Authority (PSA) claims that,

The headline inflation rate in the Philippines dropped to 6.3 after five

months of increase. The Philippines average inflation rate from January to

August 2022 was 4.9 percent after this month's inflation. The official

inflation rate for August 2021 was 4.4 percent. Additionally, in September

27, 2022 the exchange rate between PHP and USD reached 59.262 PHP.

So this research about inflation is important for readers like us

because Inflation affects all aspects of the economy from

business investment, employment rates, government

programs, tax policies, and especially for consumer spending.

We’ll also discuss the background, the problem description, its applicability, and

the studies goals as they relate to this topic.

 1.1 Statement of the Problem

General Problem - The overall purpose of this study is to define what

inflation is and how it will affect consumers’ income in the Philippines.

This study will attempt to answer the following questions such as:

1.) What exactly is inflation?

2.) Who will be affected by the continuous inflation rate increase, and how will it

affect them?

3.) Why is the inflation rate still continuously increasing?

4.) How will inflation affect the state of the economy?

1.2 Objectives of the study

1. To learn how inflation affects consumer’s income

2. To learn what factors are affected by inflation

3. To establish the best method for preparing for inflation

4. to assess the economic and price impact on the services.

 5. To have a better holistic view on understanding inflation across

different people and situations

1.3 Significance of the study

The study is useful for the following since it emphasizes the elements that

influence how inflation affects the minimum consumer income in the Philippines:

For the consumers: This study will help consumers to better understand

and have knowledge of the factors that can affect their income due to inflation.

For the parents: The parents of the students will benefit from this, for

them to gain knowledge and a deep understanding of the subject.

For the students: The results of this study will aid in a better

understanding and knowledge of the potential outcomes that could occur and

affect their academic performance. The students' decisions will be significantly

impacted by this study.

For the community: The study will be useful to the community since it

will aid in their comprehension and awareness of the causes and impacts of

inflation on consumers' minimum income.

 For future researchers: The study's findings may be useful to future

academics as they might provide data and materials for relevant research in the

future and help them gain a more comprehensive grasp of the elements that

influence inflation

1.4 Scope and Delimitations

The breadth of the economy is limited. The scope of this study is

constrained by physical factors such as available natural resources,

technology, and capital. Due to this limitation, the rate of inflation is

determined by how much the central bank can accommodate without

causing a disturbance in supply or demand for goods and services. Inflation

will have an impact on the welfare of society, which has to pay more taxes

due to higher prices. The main purpose of this study is to analyze some

economic theories and events on how much inflation can occur before it

causes disruption in society's distribution of wealth between different sectors or

classes.

1.5 References

https://psa.gov.ph/statistics/survey/price/summary-inflation-report-consumer-

price-index-2018100-august-2022
https://www.exchangerates.org.uk/USD-PHP-exchange-rate-

history.html#:~:text=Highest%3A%2059.262%20PHP%20on

%2027,54.670%20PHP%20over%20this%20period.

https://neda.gov.ph/govt-to-ensure-food-security-reduce-transport-costs-to-

combat-inflation-neda/

https://capital.com/philippines-inflation-rate-medalla-bank-

governor#:~:text=Rising%20food%20prices%20has%20been,retreating%20to

%206.5%25%20in%20August

https://carnegieendowment.org/2022/07/13/why-philippines-is-so-vulnerable-to-

food-inflation-pub-87467

https://capital.com/philippines-inflation-rate-medalla-bank-

governor#:~:text=Rising%20food%20prices%20has%20been,retreating%20to

%206.5%25%20in%20August

https://l.facebook.com/l.php?u=https%3A%2F%2Fcarnegieendowment.org

%2F2022%2F07%2F13%2Fwhy-philippines-is-so-vulnerable-to-food-inflation-

pub-

87467&h=AT1EMyHFWf2UeaJnQheDnhXkxr27sXS8xRdYd5BILvA8vst90q1i5E7

FUG3_cWggrm0uEScpmBw3tYvtE8Aq_BLwm8gdvbZTGRKUsEsD2JW0x-

zLNSs2QJxfN_I0dtznxFgS

https://www.forbes.com/advisor/in/personal-finance/how-governments-reduce-

inflation/

https://www.facebook.com/profile.php?id=100081156755422&mibextid=ZbWKwL
https://tradingeconomics.com/philippines/inflation-cpi

https://l.facebook.com/l.php?u=https%3A%2F%2Fwww.rappler.com%2Fbusiness

%2Fhow-interest-rate-hikes-impact-money-economy%2F&h=AT0aD-

wAN51h3YmmCJg22cbHIVS9ytQIznKNek_hPNX5IkehTsxmChkV5beKASSMXQ

Js56s9_cOKI9NrkHPEXN6IoU3Od9fXKinVaVd47DOkHD2lfz6iou9_nVU42KJrFh

Kw

https://www.google.com/url?sa=t&source=web&rct=j&url=https://

www.bsp.gov.ph/Media_And_Research/Publications/

BS2018_04.pdf&ved=2ahUKEwiTwNjLr837AhUXpVYBHYUvBJMQFnoECA4QA

Q&usg=AOvVaw2f1K0Gg_rt4SZ4SUoYU8Qb
 CHAPTER 2

BACKGROUND

This Chapter consist of discussions on the Review of Related

Literature and of the Researchers and the Definitions of the terms being

used.

2.1 REVIEW OF RELATED LITERATURE

I. INFLATION AND IT’S EFFECTS

Literature Review

Local Literature

According to Amadeo (2019), inflation results in higher prices for the

same goods and services. If you possess the assets before the prices rise,

you may benefit from income inflation or asset inflation, such as in stocks

or real estate. But your purchasing power will suffer if your income doesn't

grow as quickly as inflation. Your cost of living rises over time as a result of

inflation. The economy suffers if inflation is high enough. To avoid

tomorrow's increased prices, many purchase more than they need.

Suppliers are unable to keep up. Furthermore, neither can wages. Because
of this, most people cannot afford the prices of most basic commodities

and services.

Trading Economics (2019) noted that non-alcoholic beverages (3

percent of the total weight), housing, water, electricity, gas, and other

fuels (22 percent), and transportation are the most significant categories in

the Consumer Price Index in the Philippines (8 percent). The index also

includes entertainment and culture (3%), clothing and footwear (3%),

education (3%), health (3%), and communication (2%). (2 percent). The

remaining 15% is made up of alcohol, tobacco, furniture for homes,

restaurants, and other goods and services. The Philippines Inflation Rat's

most recent reported value, historical highs and lows, previous releases,

short- and long-term forecasts, an economic calendar, survey consensus,

and news are all provided on this page. Actual data, historical data, and a

release schedule for The Philippines Inflation Rate are all available – was

last updated in September 2019.

Foreign Literature
 Consumers may feel more pressured to buy now while prices are still

low to avoid potential price increases. Price increases may make it more

difficult to determine which prices are reasonable. It could cost customers

to visit various stores and compare pricing (known as shoe leather costs).

This is unlikely to be too serious for mild inflation increases, though.

Pettinger (2017) stated that using the internet and price comparison

websites might also make it simpler to compare prices.

According to Chen (2019), most people may easily experience the

consequences of cost-of-living rises in their daily lives. But the lower and

middle classes are particularly hard-hit by price increases. Less money is

left over after paying for necessities like food, gas, and utilities, leaving

little for savings or discretionary spending. C Consumers typically buy

fewer items, move to less costly alternatives, or travel further to obtain

lower costs as a way to offset price increases. When your income isn't

increasing at a similar rate as the cost of living, staying up can be very

challenging.

According to a website named look upgrade (2019), one that affects

the increase of inflation rate in Filipino people is the cost of living. If one
ordinary Filipino family can earn the exact amount for their family when

inflation becomes increase and all the price increase that’s the time that a

family will no longer buy some of their other necessity. The income of one

Filipino family cannot sustain the needs of their family because of the high

inflation rate. The cost of living that affect Filipino people are price increase

of foods like rice, vegetable, fruits, can foods, and wet foods, the increase

in transportation, and the increase in fuel oil now and then, the price

increase can also cause children’s education, the increase of electric bill

and water bill, the low income of an individual that cannot support the

family necessity, the higher cost of living can cause the poor living of

Filipino people to become very poor, and lastly, the production of the

commodities and services is increasing because of the effect of the TRAIN

law. The site also (2018) stated that another way that can affect inflation

in the Philippines is the value of the peso which becomes very low day by

day. Each day the Philippine pesos become weaker in currencies in ASEAN.

We know that some products were imported in foreign currencies and if

the pesos are in very low in cost it makes all the product costs higher

because of this currency exchange.

II. DETERMINANTS OF INFLATION EXPECTATION IN THE

PHILIPPINES

Literature Review

Under the inflation targeting framework, the inflation expectations

channel has taken on a crucial role in the effective transmission of

monetary policy decisions. Thus, it is in the interest of the central bank to

make sure that the long-term inflation expectations of those who

participate in the wage- and price-setting process are aligned with its

inflation objective (Bernanke et al., 2001).

Studies investigating the formation of inflation expectations in

emerging market economies largely emphasize the roles of inflation

persistence, the credibility of monetary and fiscal policies, and supply-side

factors. For instance, Patra & Ray (2010) use a new Keynesian Phillips

curve framework incorporating the roles of past inflation, output gap,

growth in real government expenditure, exogenous supply shocks,

marginal costs, and the stance of monetary and fiscal policies to assess the

determinants of inflation expectations in India. Their estimation results

reveal that the main drivers of inflation expectations are the following:
lagged inflation (comprising around 50 percent of the variation in inflation

expectations), changes in the prices of fuel and food (accounting for 40

percent of expected inflation), and output gap (explaining around 14

percent of future inflation). These findings indicate a high degree of

inflation inertia and the vital impact of supply factors and excess demand

conditions in the formation of inflation expectations.

In addition, they also find a negative and significant relationship

between the real interest rate, which represents the monetary policy

stance, and inflation expectations, which means that an increase in interest

rates results in a reduction in inflation expectations. This indicates that a

credible monetary policy helps anchor inflation expectations.

Similarly, Cerisola & Gelos (2005) examine the macroeconomic

determinants of expected inflation in Brazil over the period 2000 to 2004.

Employing a reduced-form inflation expectations model which accounts for

past and future inflation as well as monetary and fiscal policies, real

marginal costs of production, and supply-side factors, they present

statistical evidence that the adoption of the inflation targeting framework

(whose impact ranges from 0.66 percentage point (ppt) to almost 1.0 ppt),

as well as fiscal policy (1.0 ppt), mainly contributed to the anchoring of

inflation expectations. Moreover, their findings also suggest that a negative

(albeit insignificant) relationship exists between the real policy rate and

inflation expectations. They also find the lags of real effective exchange

rate and wage gaps to be significantly influential in determining inflation

expectations in Brazil. However, they show a comparatively low

contribution of inflation inertia in shaping inflation expectations at around

0.18 to 0.29 ppt. Their findings confirm the earlier assessment by Minella

et al. (2003) who provide evidence that a credible inflation target played a

critical role in contributing to macroeconomic stability via the anchoring of

inflation expectations and reduction of the degree of inflation persistence in

Brazil.

Consistent with the results found in emerging market economies,

Gürkaynak et al. (2008) also report that a credible monetary policy i.e.

announced inflation targets and published central bank inflation forecasts,

anchors private sector economists' inflation expectations. Hattori et al.

(2016) and Hubert (2015) likewise show that the publication of inflation
forecasts by central banks significantly influences the formation of inflation

expectations by private sector economists. Hubert (2015) argues that this

may be due to three hypotheses: "central bank forecasts [1] are more

accurate than private ones; [2] are based on different information sets:

and/or [3] convey signals about future policy decisions and policymakers'

preferences and objectives."

III. FOOD INFLATION

The Philippines is the most food-insecure country in emerging Asia

due to its reliance on imported food to feed its expanding population.

According to Tomoki FUJII (2019) We find that there is indeed a

substantial difference in the impact of food inflation across households. In

particular, the difference between agricultural households, or those

households whose main income source is agricultural activities, and non-

agricultural households is large. When we assume that the food inflation

only affects the consumer price, the recent inflation between June 2006

and June 2008 would have increased the head count index by 9.3 and 6.1

percentage points for agricultural and non-agricultural households,

respectively. However, the corresponding figures are 3.0 and 5.5

percentage points, respectively, once the positive effects of food inflation

on agricultural income are taken into account. At the same time, however,

this study also indicates that some poor agricultural households are

severely affected by food inflation.

IV. THE PHILIP’S CURVE AN ECONOMIC THEORY

A stable and inverse relationship between unemployment and

inflation rate is known as Phillips curve. The theory claims that the

economic growth, less inflation leads to more jobs and decrease of

unemployment rate. These two variables are the most important

macroeconomic variables that affect the daily lives. Falling

unemployment leads to rising inflation, and vice versa. That's at least

according to research from A.W. Phillips, the theory's namesake, whose

1958 paper examined joblessness and wage growth in the United Kingdom

from 1861-1957.

The concept of phillips’s curve shows that inflation connects to how

unemployment rate in our country increases because of poor economy.

The Phillips curve depicts the trade-off between inflation and

unemployment rate.  Studies have shown its usefulness in policymaking

and most importantly in forecasting inflation.

Furuoka (2008) analyzed the relationship between unemployment

rate and inflation rate of Philippines in accordance with Phillips curve by

applying unit root test, Johansen test; VECM (Vector Error Correction

Model) test and Granger-casualty test during 1980-2006 and found that

there exists a co integration relationship rather than causal relationship

between inflation rate and unemployment rate in the Philippines.

Resurreccion (2014) examined inflation, unemployment and economic

growth of Philippines in accordance with Okun’s Law and Phillips Curve by

applying unit root test, OLS regression technique, White’s test and VIF

during 1980-2009 and found that unemployment is inversely related to

economic growth and inflation, confirming Phillips Curve and Okun’s Law in

the Philippines for the analyzed period.

V. ECONOMIC POVERTY CAUSED OF INFLATION

The nation's economic progress would be hampered by the

soaring consumer prices, which will also keep many Filipino families
in poverty even as they earn more. According to the Socioeconomic

Planning Secretary Arsenio M. Balisacan, it is not yet apparent how

much the intense pricing pressures brought on by global headwinds

will affect Filipino consumers.

There are a number of things mentioned in that statement that

are not under control, including the conflict between Russia and

Ukraine, natural disasters, and the aggressive monetary tightening in

the US. These obstacles have severely restricted the supply of

necessities like petroleum and ingredients for food production.

As a result, food, transportation, and energy prices have

increased quickly, contributing to the chronically high global inflation

rate. In September, inflation accelerated to 6.9 percent, reaching its

highest rate in four years. The Philippines cannot escape the effects

of these global headwinds since it has a small, open economy.

According to NEDA's study, the Philippines' inflation would continue in

2022 and 2023 and could be the reason for the slowdown in the

nation's economic development.

VI. THE PHILIPPINE MONETARY POLICY FRAMEWORK AND THE

METHOD FOR MEASURING INFLATION

The selection of the price index for a central bank that targets

inflation should take into account the price level that provides the most

useful information for economic agents' decision-making. It should ideally

also be an index that reacts strongly to tools used for monetary policy. The

framework for coordinating government economic agencies under the

Committee on Economic Affairs serves as the foundation for the inflation

target-setting in the Philippines . The annual government targets for

macroeconomic indicators utilized in the creation of the fiscal program are

set by the DBCC, an interagency committee of the government. The

monetary policy framework has exemption provisions to acknowledge that

the effectiveness of monetary policy has its bounds and that there may

occasionally be violations due to events outside the control of the central

bank. These exemptions include price pressures arising from, first one is

volatility in the prices of agricultural products, second, natural calamities or

events that affect a significant portion of the economy, third volatility in the

prices of oil products, and finally, the significant changes in government

policy that directly affect prices, such as changes in the tax structure,

incentives, and subsidies. The communication strategy will have to

carefully specify the reasons, plan of action, and length of time before

implementation. Consumer prices for a representative basket are weighted

according to the suitable consumption patterns and compared to some

base year levels. To prevent CPI from losing its relevance, the choice of the

base year and the make-up of the basket are crucial. Practical reasons

dominate the use of the CPI as the foundation for policy setting under

inflation targeting. The transistory consequences of erratic changes in the

prices of several commodities also frequently have an impact on CPI

inflation.

VII. EVIDENCE FROM THE PHILIPPINES SHOWS HOW

ASYMMETRIC ADJUSTMENTS AND RELATIVE PRICE INCREASES

AFFECT OVERALL INFLATION

Accordingly, comparable price adjustments are conducted with

a constant money stock. by raising some goods' nominal pricing while

lowering others, respectively. Ball Moreover, Friedman's analysis

implicitly presupposes that nominal Prices are completely negotiable.

In the near term, nevertheless, this is not frequently the case. Price
increases may be impacted by frictions like menu prices. companies

facing pricing shocks won't alter their rates unless the requested

modification is significant enough to warrant paying the

corresponding menu price. Additionally, price modifications that are

asymmetrical could develop (Ball and Mankiw, 1994).

Positive shocks are more likely to firms' desired pricing. than negative

shocks of the same size, to produce larger modifications.

We examined how the Philippines' price changes were

distributed unevenly. see how it connects to the correlation between

inflation and the relative price level that has been found to be

positive. Pricing skewedness and price fluctuation. Information about

pricing dispersion The monthly series of variations is accessible,

together with changes, inflation, and Our analysis of the distribution's

matching asymmetry was made possible by its skewness. As per Ball

and Mankiw's (1995) technique, we calculated the indexes of

asymmetry for each month of the study period, which ran from

January 1994 to November 2019. An index for measuring the result

 of the estimation is produced. The distribution of each individual's

disaggregated price change's or inflation's imbalance month.

VIII. COST-PUSH INFLATION

Inflation theories that focused on growing production costs

rather than excessive aggregate demand were nothing new in the

late 1950s. The same justifications were later utilized in other

contexts as economic philosophy evolved. However, cost-push

theories saw a rise in acceptance in the late 1950s.

From 25% of the non-agricultural working force in the United States

to 40% in 1950, union membership rose sharply. More precisely, more

than 50% of the workers in heavy industries were organized in labor

unions following World War II (Slichter 1954; Dubofsky and Dulles 2004).

Several books, notably Goodwin (1975) and Meltzer (2009 & Forder),

explore this aspect of the inflation in the late 1950s (2010). Interestingly,

Meltzer discovered a contradiction in the cost-push inflation theories that

claimed a connection exists between the growth of companies and unions

and inflation.

They underlined that the recession that took place just before the

inflation of the second half of the 1950s was accompanied by a decline in

general prices.

According to Meltzer (2009), several Federal Open Market Committee

members believed that in order to end inflation with monetary policy alone,

a very strict strategy would be necessary. According to key Board member

and former President of the New York Fed Allan Sproul (1896-1978), "the

Committee would be kidding itself if it thought it could halt this wage-cost

spiral short of adopting a very severe monetary policy" (FOMC Minutes,

March 27, 1956).

IX. EXCHANGE RATE IN INFLATION

The General Agreement on Tariffs and Trade (GATT) commissioned

an IMF research on the effects of exchange rate volatility on global trade in

1984. It makes sense to review the topic some 20 years later given the

significant changes in the global economy since then.

 The presumption that a corporation cannot change factor inputs in

order to efficiently adjust for exchange rate fluctuations is one reason why

exchange rate volatility may negatively impact trade. Increased variability

can actually result in profit opportunities when this presumption is loosened

and enterprises are capable of adjusting one or more factors of production

in response to changes in exchange rates. Canzoneri, et al. (1984), De

Grauwe (1992), and Gros (1993) have all examined this situation (1987).

Another estimate of the welfare costs of currency rate volatility is

provided by Obstfeld and Rogoff (1998). They expand the "new open

economy macroeconomic model" to include an explicitly stochastic setting

where risk affects firms' pricing choices, which has an influence on output

and global trade flows. They give an example to show how pegging the

exchange rate could result in a welfare gain of up to 1% of GDP by

bringing exchange rate volatility to zero.

X. INFLATION AND INTEREST RATES INCREASE TOGETHER

Inflation affects interest rates in two stages: first, the Federal

Reserve (Fed) raises short-term interest rates to control the money supply

by making borrowing more expensive. Because this increases

the cost of borrowing for banks, the increased cost is passed on to the

client in a second stage. Consumer loan interest rates are rising.

Certain types of loans undergo changes prior to the Fed's decision.

For example, 60 days after your mortgage closing, the loan is typically sold

into the market. Mortgage lenders attempt to forecast the future based on

Federal Reserve statements and market sentiment. This is significant

because rates should not be out of step with competitors.

There are a variety of reasons for inflation, the biggest outside of

demand being supply chain issues. However, the only thing the Fed has

influence over is the level of demand. It impacts this by making it more

expensive to get your hands on cash, which has the effect of making

people treat the money they do have in a more precious fashion. This

decreases spending in hopes of bringing inflation to a more sustainable

level.
 In 2020, dealing with economic shutdowns related to COVID-19, the

Fed dropped interest rates by 1.5% to near zero with the goal of making it

cheaper for people to borrow, which encourages spending. This keeps

people employed in making goods and services, so it worked as intended.

However, at the same time, the government gave a series of three

stimulus checks to many Americans. This combined with low interest rates

meant that people had more money in their pockets and were willing to

spend it. Pretty soon, there came to be more demand than supply could

keep up with. When people are willing to pay higher prices for limited

goods and services, an inflationary cycle kicks in.

Now the Federal Reserve has pushed the FED funds rate up to 2.25%

to a range of 2.25% – 2.5%. More increases are planned for the future

until inflation reaches the Fed’s 2% target. Right now, annual inflation

according to the Fed’s preferred metric is 4.6% as of this writing, excluding

food and energy, but there’s a long way to go.

XI. GOVERNMENT INTERVENTION THROUGH MONETARY POLICY

Monetary policy is the management of a country's money supply. In

other words, is it easier or harder to access funds? We care about the

amount of money in the economy because too much can cause inflation to

spiral out of control. If, on the other hand, money is scarce, you have a

major warning sign of a recession because consumers and businesses will

be reluctant to spend on goods and services that keep people employed.

The FED controls the monetary supply by setting interest rates,

specifically the federal funds rate. The federal funds rate is the interest

charged when banks borrow money from each other overnight. Because

banks pass through costs to their consumers, every rate offered by the

bank is impacted by the federal funds rate.

In March 2020, when it wanted to encourage spending to keep the

economy afloat during COVID-19, the Fed slashed the Fed funds rate to

near zero. Housing is also a major part of the economy, so it bought

mortgage bonds to help keep mortgage rates lower than they otherwise

would be. We’ll have more on mortgage bonds in the next section.
 Fast forward to this year. The Federal Reserve System (FED) is

ready to tap the brakes a little bit on the economy in response to elevated

levels of inflation. They’ve raised the federal funds rate several times this

year. With interest rates increasing, borrowing is more expensive. This

encourages people to keep the money that they have in the bank, where

they also earn a higher rate of interest.

If there’s more saving and less spending, prices should theoretically

level off or even come down over time. That’s always the hope of the

Federal Reserve and the federal government.

The FED buying mortgage bonds kept demand for housing strong,

but at the same time, higher and higher prices were supported by

extremely low rates. The Federal Reserve has started to sell some of those

bonds back into the market, which will have the effect of pushing rates

higher.

XII. IN THE PHILIPPINES, ONIONS ARE NOW MORE EXPENSIVE

THAN MEAT
 In order to supplement declining domestic supplies and contain

soaring expenses, the Philippines' agriculture authorities announced this

past weekend that the nation would have to resort to importing over

22,000 tons of onions by March.

A recent bilateral agreement between the Philippines and China to

expand agricultural and economic cooperation was also reached. It's

unclear whether this collaboration will include importation of onions. This

study demonstrates how inflation can make even inexpensive items, pricey.

XIII. RISING PRICES, SINKING HOPES: HOW INFLATION

AFFECTS FILIPINO’S LIVES

The majority of Filipinos are lowering their standards of living as

costs continue to climb, forcing them to adjust their lifestyles. Those who

depend on their fixed incomes must now discover alternative sources of

income or else they face the risk of not having enough money for

maintenance. Planning, looking into alternative sources of income, cutting

costs, and taking the plunge into investing are just a few strategies to help

manage these effects.

This study demonstrates how sad Filipinos might get when the rate

of inflation rises. Previously, 100 PHP could last for a week, but owing to

how costly everything is now, it won't even last a day.

XIV. THE RETURN OF INFLATION

Strong economic growth and inflation returned as the world economy

began to recover from the covid-19 pandemic. For a number of years, the

rate of inflation remained low, but ECB1 claimed, the increase in inflation in

2022 will be the fastest in 13 years.

Many economists were caught off guard by the sudden rise in

inflation; nearly no one predicted it. Not all factors contribute to inflation

growth, including consumer goods. Due to a decline in output and an

increase in demand, the cost of electricity, gas, and oil has increased

globally
XV. IMPACT OF RELATIVE PRICE CHANGES AND ASYMMETRIC

ADJUSTMENTS ON AGGREGATE INFLATION: EVIDENCE FROM THE

PHILIPPINES

Literature Review

1. Prices in the Philippines, on average, changed in about 75.6% of the months

in the sample period (ie price increases and decreases). Between 1994 and

M9 2019 (ie 308 months), there were 200 months when prices increased and

29 months when they decreased. Price increases, on average, occurred every

1.5 months while price decreases happened every 10.4 months.

2. Increases in prices were seven times more likely to occur than price decreases

and almost three times more prevalent than no price change.

3. Prices stayed the same at an average rate of once every four months, or

equivalently 24.4% of the entire period.

4. Price decreases, on average, accounted for a relatively small percentage at

12.7% of the total price changes (ie price increases and decreases).

5. Among the commodity groups, food, and non-alcoholic beverages, alcoholic beverages and

tobacco, housing, utilities, gas, and other fuels, and restaurant and miscellaneous goods

experienced higher rates of price changes relative to other commodity groups. Quite the
opposite is the case for education and communication, where the frequencies of price changes

are substantially lower than the others.

A significant policy shift that occurred over the 1994–M9 2019 sample period is

the adoption of inflation targeting (IT) as the framework for monetary policy in the

Philippines in 2002.5 Empirical studies (eg Guinigundo (2017)) have observed that

changes occurred in the country’s inflation dynamics following the adoption of IT.

Inflation persistence gradually declined as the inflation process shifted from being backward-

looking to more forward-looking. Bangko Sentral ng Pilipinas (BSP)

managed to keep inflation within target, leading market agents to adopt a more

forward-looking view in their assessment of current inflation. With increased

monetary policy credibility, expected inflation started to weigh more in the pricing

decisions of firms and consumers.

To assess the potential impact of IT on price changes, we divide our sample

period into 1994–2001 and 2002–M9 2019 and compare the movements in relative

prices between these periods. In Table 2, prices (on all items), on average, are shown to have

changed less (ie price increases and decreases) during the IT period (73.2%) relative to the

pre-IT period (79.8%). The frequency of price increases declined. Significantly in the IT period

(63.8%) compared to the 1994–2001 period (70.8%).

Moreover, the proportion of price decreases and no price changes increased in the

2002–M9 2019 period.

Among the commodity groups, food, and non-alcoholic beverages, which have the

the largest weight in the CPI basket, as well as alcoholic beverages, tobacco, etc, clothing and
footwear and education experienced higher shares of price increases in the IT period relative to

the pre-IT period. Most of the items in the food and non-alcoholic beverages commodity group

(eg rice, other cereals, fish and seafood, milk, cheese and eggs) had a higher frequency of price

increases in the 2002–M9 2019 period compared to the 1994–2001 period.

Price increases in food items, particularly of agricultural commodities are for the most part due

to weather-related disturbances that cause lower supply and disruptions in the supply chain.

The incremental increase in the tax rates of alcoholic beverages and tobacco products resulted

in significant adjustments in the prices of alcoholic beverages and tobacco products starting in

2014. Meanwhile, lower proportions of price increases were observed for the commodity groups

of housing, water, electricity, gas, and other fuels, restaurant, miscellaneous goods and services

and transport in the IT period relative to the pre-it period.

The duration of the gaps between price increases was, on average, 1.4 months

over the 1994–2001 period. This lengthened to 1.6 months in the 2002–M9 2019

period. Within the commodity groups, there was a notable lengthening in the

the duration between price changes for transport, communication, recreation, culture

and education in the 2002–M9 2019 period.

The observed decline in the frequency of price changes and the lengthening of

the duration between price adjustments corresponds to a period of lower average

inflation in the economy. Inflation declined from an average of 7.6% between 1994

and 2001 to 3.8% in the 2002–M9 2019 period. The rates of price change for the

different commodity groups likewise declined in the later period.

CONCEPTUAL INTEREST
RATES

FRAMEWORK
RESERVE
REQUIREMENTS

OPEN-
MARKET
INFLATION MONETARY TRANSACTIO
POLICY NS

GROSS
NOT RECEIVING
HIGHER FOOD DOMESTIC
AN INCREASED
COSTS PRODUCT
WAGE
(GDP)

SLOWER lowers the values of

pensions, savings, EXCHANGE
ECONOMIC
and Treasury notes. RATE
GROWTH

Reduced
HIGHER UTILITY POVERTY
purchasing power
COSTS
 CHAPTER 3

Methodology

This study includes the discussions on population and

sample that responded to the questions the researchers had prepared,

a sampling procedure, and a justification for the research design.

Additionally, the technique of data gathering used by the researchers

and the instrumentation wherein the questions. Lastly, the

researcher's summary of the participants' responses to questions in

data analysis, procedure and timeframe, and assumptions.

3.2 Research Design

This study conducted will use Qualitative-Case Study

research design. In this research, it will answer questions on how

inflation affects human life, it will fulfill questions on how, who, what

inflation impacts and is made to conclude best methods for preparing

for inflation. The researchers wants to know how people functions in

specific contexts using survey questions.

3.3 Population and Sample

The Population of this research is composed of 5 randomly

selected from Grade 11 - Resilient students to answer the survey. Only

the ABM-Resilient will take part in this research. The sampling method

will be used is purposive sample.

3.4 Sampling Procedure

With the help of survey questions, we performed research

to identify how inflation affects consumers and learn how individuals

behave in various situations. We employ judgmental or purposive

sampling of people who are likely to have particular traits or

experiences. This means that the researcher will choose the

respondents at his or her leisure.

3.5 Data Gathering

The survey will be presented to the subjects using Google

Forms as the data collection tool. The subjects will provide information
on how inflation affects their income by responding to the questions

the researchers have prepared.

3.6 Instrumentation

In this research, we conduct an Online questionnaire survey

using GForms among Grade-11 ABM students of E. Rodriguez Jr. High

School. The set of questionnaire was constructed for the respondents

to get their opinion about how do students face inflation. This type of

data questionnaires will be beneficial for researchers to gather data on

respondents related to the topic and to outline a major result. The

question asks are as follows:

1. Name, Age, Email, Gender?

2. How do you budget your money in this crisis?

3. How does inflation affect you as a student?

4. What can be done as a student to be prepared for inflation?

5. What can you do to protect your savings or retirement fund when

inflation hits?
 3.7 Procedure and Timeframe

Data collection The researchers will The researchers are beginning of January
through surveying question five pupils interested in the 2023
from the resilient Grade 11-Resilient
ABM strand in grade students'
11 at E. Jr. Rodriguez perspectives,
How inflation affects responses, and
people's lives and understanding on
income in high school inflation.
Data Evaluation The data that the In regard to this Second week of
researchers have research, the January 2023
gathered from their researchers must
surveys will be keep their
interpreted by them. subjectivity, biases,
experiences, and
planned actions
distinct.
Creating Research The researchers The researchers Third week of January
Paper (Chapter 3) decide on the purpose describes the 2023
of the study and participants, the data
research design gathering materials
and the research
procedure used in the
study.
Research Presentation The researchers Researchers should Fourth week of
prepare for the oral make an effort to only January 2023
research presentation. include information
that is needed and
necessary.

3.8 Data Analysis Procedure

They researchers must separate their subjectivity, biases,

experiences, and planned acts in relation to this research as researchers.

 Additionally, the other researchers tried to come up with their own

answers in order to determine what results other people would have.

Lastly, the researcher is able to take different perspectives. The

researchers used their objectivity and critical thinking abilities to analyze

the acquired data in order to interpret it correctly and without bias. In

order to guarantee the impartiality and accuracy of the study's findings, the

researchers thoroughly examined the data they had collected.

3.9 Assumptions

Due to inflation, people of the Philippines struggles to buy goods or

needs. Their income has dropped and aside from the drop of their salary,

the value of peso is also affected by this inflation that results to weak

buying power.

As a result of this issue that the people has to overcome each day,

they must learn how to spent their money the right way, that’s why they

should now know how to budget their money and prioritize their needs, not

their wants.