Inflation, in recent years, has become a concern not only of national policymakers but also of individual households. The unprecedented rise in the prices of goods and services in the country in 1984 have invariably affected many sectors of society and understandably made planners and decision makers more concerned about closely monitoring price increases and keeping them down to a minimum.
This monograph features a model for forecasting domestic inflation on a monthly basis. It describes a statistical procedure for forecasting monthly inflation as measured by changes in the CPI for the entire Philippines. The procedure centers around a statistically estimated price equation which explains the dynamic behavior of monthly CPI levels in terms of their own past values and cost-push and demand-pull factors.
As a response to an immediate concern, this central price equation offers the novelty of it being of a short-term nature and its incorporation of institutional realities such as the inclusion of a dollar black market premium. It is hoped that the model will be useful in anticipating inflationary movements and in instituting the appropriate policy adjustments that could ultimately assist in lessening the woes of consuming public.
