Research Paper Inflation Rate in The Phi
Research Paper Inflation Rate in The Phi
Research Paper Inflation Rate in The Phi
CHAPTER I
Introduction
Inflation in a general manner affects the behavior of every people. Our choice to
purchase a single product will vary for the reason that the cost of the same product we
bought a month ago may be different from its current price, which basically is a result of
inflation. Inflation is the rising price of goods and services over time. (Amadeo, K.,
2018). In short, inflation increases our cost of living. Once our cost of living increases,
our power to purchase certain goods and services will decrease since it decreases the
In the Philippines, inflation are being managed and handled by the Bangko
Sentral ng Pilipinas (BSP), with the main goal of limiting and normalizing the rate of
inflation in order not to affect the living of the Filipino people and for the economy to run
smoothly. Section 3 of Republic Act 7653 or the New Central Bank Act, signed in 1993,
stated that the BSP’s primary objective is “to maintain price stability conducive to a
balanced and sustainable growth of the economy. It shall also promote and maintain
monetary stability and the convertibility of the peso.” A change in the government ruler
also plays an important role in the increase or decrease of inflation rate. If the projects
and services and other external factors like security and order amongst others are not
controlled and maintained, drastic change in the inflation rate may follow. Noticeable
inflation increases were observed during the time of then-presidents Ferdinand Marcos,
Cory Aquino and Gloria Arroyo dating back to 1970s which were affected by various
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factors like the devaluation of the peso, massive government spending, skyrocketing
world oil prices, pernicious policies of debt-driven growth, crony capitalism, multiple
coup attempts, global rice crisis, and a series of typhoons. According to economist JC
Punongbayan, Under the Rodrigo Duterte administration, the country’s high inflation
rates are caused not just by rising world oil prices. Added by Rappler, other factors also
contribute to it, such as the effect of the tax reform law on the price of petroleum
According to the Philippine Statistics Authority (PSA), the country’s inflation rate
rose from 6.4% in August to 6.7% in September 2018 which is the highest in over 9 years
and also the 9th consecutive monthly inflation rate increase starting from January 2018.
Government economic managers and some businessmen have said the recent inflation
levels are “mere hiccups” and are “manageable”, and some have even attempted to drag
previous administrations into the increasing inflation issues to justify the current
numbers.
Recently, we were greeted by truly shocking news: the Philippines inflation rate
which measures how fast prices are rising, reached a whopping 6.4% in August
(Punongbayan, J., 2018). This drastic increase in the rate is not only the highest in 9.4
years, it also exceeded government’s upper forecast of 6.2%, and is way above the
government’s 4% target in 2018. In addition, data also shows that this enormous 6.4%
rate is also the highest in all ASEAN countries. In relation to this, we can also notice that
when President Duterte came into office, the inflation rate of the Philippines was always
in the middle, but these days, we’re on top of everyone else. What could probably be the
reason why the Philippines experience this sudden change compared to other neighboring
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countries? And what could possibly be the action to be done, to at least remediate and
The general problem of the study is the effect of inflation during the Duterte
Administration.
1. What do you think are the possible reason for the drastic increase of inflation rate
2. Do you have any suggestion on how will the government remediate the drastic
The study is deemed beneficial and significant to the following groups and
institutions:
Future Researchers. They will find this study useful and may use as a reference
if they want to conduct a broader approach in relation to the topic of this research.
Government. The current government may also find this research beneficial in a
way that they can use the insights of his people who got to experience the effects of
inflation.
This study is limited to the realized effects and possible perceived causes of
drastic increase of inflation rate during the Duterte Administration. The study covered the
CHAPTER II
THEORETICAL FRAMEWORK
This chapter deals with the presentation of related theories, studies and literature,
which provided the basic framework for this study. This section also includes the
presentation of research paradigm in response to the research questions raised in the first
chapter. Furthermore, the list of variables with definitions that are used in this study is
Relevant Theories
economists who have provided the theories of inflation are broadly categorized into two
On the other hand, structuralists believed that the inflation occurs because of the
unbalanced economic system and they used both monetary and fiscal measures together
sellers together decide a new price that is different from the competitive price, then the
price is termed as market-power price. Such groups keep prices at the level at which they
can earn maximum profit without any concern for the purchasing power of consumers.
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oligopolists can increase the price to any level even if the demand does not rise. This hike
in price levels occurs due to increase in wages (because of trade unions) in the
oligopolistic industry.
The increase in wages is compensated with the hike in prices of products. With
increase in the income of individuals, their purchasing power also increases, which
Apart from this, some economists concluded that fiscal and monetary policies are
not applicable in practical situations as these policies are not able to control rise in prices
levels. These policies would work only when prices rise due to an increase in demand.
due to increase in the cost of production. Monetary policy can reduce the rate of inflation
by raising the interest rate and regulating the credit flow in the market. However, it would
have no effect on the oligopolistic price as the cost is transferred to the prices of goods
and services.
represents one extreme end of inflation. According to this theory inflation exists even
when there is no excess in demand. On the other end, the conventional demand-pull
theorists believed that the only cause of inflation is the excess of aggregate demand over
aggregate supply.
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its maximum production capacity. At this point, the supply of goods and services cannot
be increased further while the demand of products and services increases rapidly. Due to
this imbalance between demand and supply, inflation takes place in the economy.
Structural Theories of Inflation. Apart from the two extreme ends mentioned in
the above, there is a middle group of economists called structural economists. According
to structural theory of inflation, market power is one of the factors that cause inflation,
but it is not the only factor. The supporters of structural theories believed that the
inflation arises due to structural maladjustments in the county or some of the institutional
Ackley. According to him, inflation cannot occur alone by demand and cost factors, but it
refers to the inflation that occurs due to excess of aggregate demand, which further
results in the increases in price level. The increase in prices levels stimulates production,
but increases demand for factors of production. Consequently, the cost and price both
increases.
In some cases, wages also increase without rise in the excess demand of products.
This results in fall in supply at increased level of prices as to compensate the increase in
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wages with the prices of products. The shortage of products in the market would result in
Therefore, Prof. Gardner has provided a model of mark-up inflation in which both
the factors, demand cost, are determined. Increase in demand results in the increase of
On the other the goods are sold to businesses instead of customers, then the cost
of production increases. As a result, the prices of products also increase. Similarly, a rise
in wages results in increase in cost of production, which would further increase the prices
of products.
increases in wage rates; therefore, both monetary and fiscal policies should be used to
control inflation. Though, these two policies are not adequate to control inflation.
Eckstein. According to him, the direct relationship between wages and prices of products
is the main cause of inflation. In other words, inflation takes place when there is a
simultaneous increase in wages and prices of products. However, he believed that wage
push or market-power theories alone are not able to provide a clear explanation of
inflation.
After analysis of inflationary situation, Prof Eckstein says that the inflation occurs
due to the boom in capital goods and wage-price spiral. In addition, he also advocated
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that during inflation prices in every industry is higher, but few industries show a very
These industries are termed as bottle-neck industries, which are responsible for
increase in prices of goods and services. In addition, Prof. Eckstein advocated that
Related Studies
Presented below are the related studies pertaining to inflation and comparison of
“Our results show that while inflation in all three countries is affected by
different external factors, Malaysia and Singapore avoided high inflation despite high
levels of economic growth through ‘tight’ monetary policy. In contrast, the Philippines
had high inflation, even with a stagnant economy, due to ‘loose’ monetary policy and the
The above mentioned citation is true because in general, the cause of inflation in
typically related to fiscal imbalances such as higher money growth and exchange rate
depreciation arising from a balance of payments crisis dominate the inflation process in
developing countries.
peacetime inflation of 50.32% in 1984, many Filipino thought that they have seen the
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worst, especially when, in the two consecutive years of 1986 and 1987 under the
democratic space provided by the Aquino government, inflation fell to an annual average
of 0.80% in 1986 and 3.9 in 1987 (Yap, 1996). True enough, for the following decades –
1990s to 2000s- average annual inflation did not even go past the 20% mark.Economic
analysts and politicians attribute these inflation figures to sound economic fundamentals,
but some economists, particularly the central bank authorities, acrive these to sensible
monetary programming.
Conceptual Framework
This shows the research paradigm for the perceived causes of Inflation Rate
The frame of conceptual framework shows the input of the study which consists
of the classroom discussion of the topic; and the articles and references related to
The second frame represents the process in which includes systematic procedures
for conducting the study. These includes research about the topic and the history of
movement of inflation for the past years, and interview with the selected sample size on
the perceived causes of drastic increase in the inflation rate during Duterte
Administration.
Lastly, the third frame represents the output, which consists of the perceived
causes of drastic increase in inflation rate identified by the respondents of this research.
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CHAPTER III
RESEARCH METHODOLOGY
This study used the descriptive research design to realize its objectives. The
researchers believed that descriptive research can provide an in-depth analysis of the
perceived causes of increase of Inflation rate during Duterte Administration. This study
did not test specific relationships between variables but it had provided information about
the trend and attributes with the goal of reaching a better understanding of the causes of
Creswell (2003) defined qualitative research as approach in which the inquirer often
To gather the necessary data needed for the study, the researchers selected ten
Center, in which they all refused to be mentioned in this research. The interview to the
different Managers and Heads in the various areas/departments under the Administrative
division provides valuable result to the assessment of the perceived causes of increase of
Research Instruments
For this study, an interview was conducted which started from October 22 up to
October 26, 2018. The researchers produced a list of questions to be asked during the
interview which focused on their perceived causes of the drastic increase of Inflation rate
The researchers used primary data which were collected from the interviews, The
interview was done in a manner that the day-to-day operation and work of the
respondents won’t be affected. During the interview, it was discussed to the interviewee
that all personal information and or political views and opinions will be strictly
confidential and will be for academic and research purposes only. In addition, with the
agreement of each interviewee, the researchers’ audio recorded the complete interview
The researchers transcribed the recorded interviews for analysis and managed it
closely to ensure quality of the recorded audio. The researchers read the transcribed
interviews several times to obtain a sense of the overall data. At the same time, the
researchers wrote short phrases, ideas or key words, in the margins to facilitate the
analysis. The researchers ranked the interpreted data by concept and established the
CHAPTER IV
This chapter presents the data analysis, interpretation and presentation there-to on
the study of the perceived causes of the increase of inflation rate during Duterte
Administration. The data are categorized based on how it was presented on the first
chapter.
Question 1. What do you think are the possible reason for the drastic
The following discusses the causes and effects of inflation during the Duterte
Administration.
First, as mentioned in the above statements, one of the factors that affects the
inflation rate are from the combination of international and domestic products,
particularly the importation of Oil, which is obviously continuing to rise its price
worldwide. Philippines being one of the countries with no substantial oil production, are
forced to import oil. Researches shows that compared to other neighboring ASEAN
equates to increase in prices of all goods and services. This increase has a domino effect
where the rise of one factor lit-up the rise of other factors. Higher prices of commodities
Second cause of high inflation rate in the Philippines are the existing crisis in the
tighter supply of many agricultural products, rice specifically. We have heard from the
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news that the President flatly denied that there’s any problem in the supply of Rice in the
country. But in connection with this, we have also heard from the news that some regions
in the country experienced double-digit inflation rate for a specific month which happens
to be the highest inflation rate for rice. Actually, it’s not only rice but also vegetables,
These goods which were affected by high inflation rate are included in our basic
needs. These are the goods we take in order to survive. For the people who do not belong
to the marginal group will not be affected by the rising price of these, but those people
who belong to the minimum wage earner and belong to the category of “poorest of the
poor” will be the most affected one. The increase in price means lesser purchasing power
Third possible cause of high inflation rate is the continuous decrease in the value
of Peso. According to the news, it has been 12.2 years since the value of our peso became
the lowest. In addition, our currency has been one of t weakest in ASEAN today. Because
we pay imports in foreign currencies, a weaker peso necessarily makes imports costlier.
As such, oil becomes costlier too, as well as all the other goods and services in the
economy that rely on it. (Punongbayan, J., 2018). If we’ll take a look at it closely,
currently, the widening trade gap between our imports and exports of products only
equates to we are paying more dollars than we are earning, and the abundance of peso
only equates to its weakening value. Another contributing factor to the gap between our
import and export are the raw materials (basically iron and steel) which were used in the
Duterte Administration’s infrastructure push “Buil, Build, Build”. Therefore, we can say
that this project is partly to be blame in the weakening value of Peso. This is not
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necessarily bad, but as indicated in the statements above, weak peso makes import
costlier in general.
Finally, another reason of the drastic increase of inflation rate is because of the
implementation of Tax Reform for Acceleration and Inclusion Law (TRAIN Law). If
we’ll take at it at one glance, we can say that this TRAIN Law has a good effect since
bigger pay will be take home by the employees since tax that are supposed to be collected
on income tax are imposed on other commodities. But taking this TRAIN Law as a whole
and looking at it in a bigger picture, we can say that its effects are not good. Why? As an
example, taxes on income being paid by taxable employees are decreased, and part of the
lost government income will be collected on by increasing the taxes on Sin Tax (taxes on
tobacco, alcoholic beverage and others), taxes on winning (lottery), and Gasoline. As
mentioned earlier, gasoline considering as the cost driver for all goods and services, an
increase in its price will only means an equal increase in the prices of goods and services
that rely on it. And again, the higher the price, the lesser the purchasing power of the
people.
Below are the recommended solutions and alternative courses of action in order to
First, considering that all given causes and effects almost arises or were the effect
of the implementation of TRAIN Law, I believe it is right to say that there must be some
amendments and adjustments that must be made in order to control and the continuing
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increase of the inflation rate. In connection with this, the nearing implementation of oil
price hike on the following years must also be put on hold, to arrest runaway inflation
immediately. Instead of oil price increase, the government may recover the lost income
by raising interest rates, and hastening the importation and distribution of rice
nationwide.
Second, for rice, government can mop up its errors by importing more rice, fast-
tracking the distribution of imported rice, and passing the rice tariffication bill. In
addition, Duterte will also give us a favour by immediately firing the inept officials who
Third, since inflation affects the behaviour of the consumers, the economic
managers must rein in people’s expectations about future inflation. They can do this by
regaining the people’s trust and showing us all they’re on top of the economic situation.
the economic managers must do something about this and acknowledge that the effects of
this high inflation rate is not fine and that they must do something about it before its tool
CHAPTER V
RECOMMENDATIONS
This chapter presents the summary of the findings, the conclusions based on the
results obtained, analysed and interpreted data presented in the previous chapter and
recommendations of the study on the perceived causes of increase in the inflation rate
Summary of Findings
From the research problems and the result of the interview, the major findings can be
summarized below:
1. What do you think are the possible reason for the drastic increase of inflation
perceived causes of the drastic increase of Inflation Rate during the Duterte
TRAIN LAW and the Build, Build, Build project of the government.
2. Do you have any suggestion on how will the government remediate the
From the result of the interview, it was summarized that as per the
interviewee,
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fast tracking of the imported and distribution of Rice and the passing of the rice
tariffication bill, and since inflation affects the behaviour of the consumers c) the
Conclusion
1. That the perceived causes of drastic increase of inflation rate during the
Recommendations
1. In order to control the continuing increase of the inflation rate, since some of
the areas that is identifiably causes the shoot of inflation, certain law,
2. Regardless of the positive and or negative effects of inflation and how people
perceived it, the government must do something about this matter before it’s
3. The researcher also recommends that a future study should be made in relation
to this matter in order for the people to have an awareness on how we must
BIBLIOGRAPHY
A. Published Dissertations
B. Electronic Sources