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"Riding the Economic Rollercoaster: A Case Study
analyzing the Causes and Consequences of Inflation in
the Philippine Economy"
Bachelor of Science in International Travel and Tourism Management
4-1
By:
Bonsol, Marie Andrei
Catalan, Aizel Vern Louise
Cuaresma, Laika Marie
Garcia, Jemne Reina
Guano, Karmela Lauren
Jader, Daryl Angela
December 2023
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COLLEGE OF INTERNATIONAL TOURISM AND HOSPITALITY MANAGEMENT
I.
OBJECTIVE
Inflation, a major concern for the global economy, refers to the ongoing rise in
the overall prices of goods and services, which has a significant impact on
economies around the world. Our goal in this case study is to thoroughly
investigate the complex effects of inflation on the global stage. We intend to
investigate the underlying causes and drivers of global inflation, shedding light on
the various factors that contribute to this economic phenomenon. More so, provide
concrete policy and research recommendations by summarizing our key findings
and presenting evidence-based recommendations for policymakers, economists,
and researchers to address the challenges posed by inflation in the coming years.
In addition, we will identify areas that require additional research to better
understand the dynamic nature and consequences of inflation. By achieving these
goals, this case study hopes to provide meaningful perspectives on the
complexities of inflation as a global economic phenomenon, as well as a foundation
for making well-informed decisions and crafting effective policies.
II.
DATA
According to the report of the Philippine Statistics Authority released on
December 5, 2023, from 4.9 percent in October 2023 to 4.1 percent in November
2023, the Philippines' headline inflation, or overall inflation, declined even further.
In January through November of 2023, this leads to an average national inflation
rate of 6.2 percent. November 2022 saw an 8.0% increase in the rate of inflation.
Moreover, the comparatively lower year-over-year growth rate of the heavilyweighted food and non-alcoholic beverage category—which increased from 7.0
percent in October 2023 to 5.7 percent in November 2023—was the main cause
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of the overall inflation downturn in November 2023. Transport followed
subsequently, growing by 0.8 percent annually from October 2023 to 1.0 percent
annually. The overall inflation trend was aided by the restaurants and lodging
services index, which had a lesser inflation rate in November 2023—5.6 percent
as opposed to 6.3 percent the previous month.
Throughout the month, the indices of several commodity groups—including
alcoholic beverages and tobacco, apparel and footwear, housing, water, electricity,
gas, furniture, health, information and communication, recreation, sport and culture,
education services, personal care, and other goods and services—saw annual
declines. The pandemic's effects on the economy were the main cause of these
declines.
III.
THEORETICAL FRAMEWORK
A few theoretical frameworks are frequently used to analyze inflation in the
context of the global economy, which is defined as a persistent increase in the
average price of goods and services over time. According to the Quantity Theory
of Money, the main cause of inflation is an excessive increase in the money supply
in comparison to the output of goods and services, which drives up prices. Even
though the Phillips Curve shows that unemployment and inflation are inversely
related, it is unable to account for stagflation or the changing dynamics of the
contemporary economy.
Furthermore, the ideas of cost-push inflation and demand-pull inflation highlight
how inflationary pressures are caused by growing production costs and demand
that exceeds supply, respectively. To adjust for the influence of expectations on
wage and price setting, the Expectations-Augmented Phillips Curve incorporates
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additional information about people's anticipated inflation into the calculation.
Additionally, monetary policy and inflation targeting techniques are used by central
banks around the globe to control inflation. They do this by changing interest rates
or by implementing quantitative easing to target a particular inflation rate. The goal
of supply-side economics is to reduce inflationary pressures by implementing
policies that increase productivity and efficiency.
Globalization and international trade, two factors that impact inflation in this
interconnected global marketplace, lead to a combination of price reductions
through competition and cost escalations in different sectors. A thorough analysis
that considers these
different frameworks, economic conditions, policy
interventions, and the complexities of global markets is necessary to comprehend
inflation in the global economy.
IV.
CONTEXT AND BACKGROUND
In the Philippine context, inflation is the increase in prices of goods and services
brought on by a decline in the buying power of the Philippine peso. The Consumer
Price Index (CPI), which monitors changes in the costs of a pre-established basket
of products and services that Filipino households typically use, is frequently used
to quantify it.
According to the Philippine Statistics Authority (PSA), there was a
significant increase in inflation in the Philippines in June 2022, with the rate hitting
a three-year high of 6.1%. Since October 2018, this was the month with the highest
inflation rate. Even while President Ferdinand Marcos Jr. played down the number,
describing it as "not that high," growing prices for necessities have put pressure on
Filipino consumers. The consumer price index (CPI), which measures inflation,
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shows a decline in purchasing power. In this case, the value of P1 fell to 87
centavos, the lowest since 2018. Food and non-alcoholic drinks (6%),
transportation costs (17.1%), and other commodity groupings had price increases,
which added to the nation's four months of straight inflation in 2022. To
comprehend economic patterns and guide policy, the PSA and Bangko Sentral ng
Pilipinas (BSP) are essential for tracking and predicting inflation. The dynamics of
supply and demand, the Bangko Sentral ng Pilipinas' (BSP) monetary policy
decisions, the effect of world oil prices on the country's import-dependent economy,
and government fiscal policies are some of the variables that contribute to inflation
in the Philippines. The BSP keeps an eye on inflation, and reliable sources for the
most recent data include the BSP's official website, the World Bank, the Philippine
Statistics Authority (PSA), and respectable news organizations like Bloomberg and
Reuters. For the most up-to-date information and analysis on inflation in the
Philippines, it is advised to consult these sources.
V.
STAKEHOLDERS
In the case study "Riding the Economic Rollercoaster: A Case Study analyzing
the Causes and Consequences of Inflation in the Philippine Economy," numerous
stakeholders play important roles in shaping and responding to the economic
landscape. The Department of Finance and the Bangko Sentral ng Pilipinas (BSP)
are essential stakeholders in the implementation of fiscal and monetary policies.
Reflecting on their judgments demonstrates the fine line they must walk between
promoting economic growth and maintaining price stability. The Central Bank,
represented by the BSP and its Monetary Board, plays a vital role in using
monetary tools to regulate inflation, provoking debate on the efficacy of these
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tactics and the difficulties associated with preserving stability while promoting
growth.
Furthermore, the business community, which includes corporations and small
to medium-sized firms (SMEs), emerges as a key player in this economic narrative.
Inflationary pressures surely have an impact on the cost of manufacturing, pricing
tactics, and overall profit margins for organizations. Reflecting on the struggles that
these organizations have faced provides insight into their resilience and
adaptability as they navigate the volatile economic terrain.
The case study stimulates an analysis of the complicated interplay of
stakeholders in this dynamic economic rollercoaster, emphasizing the necessity
for a full understanding of their responsibilities and the various perspectives on the
repercussions of inflation in the Philippine economy.
Furthermore, the general public emerges as a critical partner in the Philippine
economy's inflationary story. Changes in the cost of living, which is inextricably
linked to inflation rates, have a direct influence on ordinary residents. Reflecting
on regular people's experiences and challenges gives light on the social
ramifications of inflation, such as its ability to worsen income inequality and
influence the purchasing power of different socioeconomic groups. It inspires
reflection on how government policies and economic decisions are received by the
general public, as well as how social welfare measures might be altered to alleviate
the negative consequences of inflation on disadvantaged elements of society.
Financial institutions and investors are also important players in the economic
rollercoaster. Interest rates, currency volatility, and overall economic stability are
all important to banks, investment firms, and individual investors. Reflecting on
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these viewpoints reveals how inflation influences investment decisions, asset
valuations, and the general health of the financial industry. It encourages thought
about the tactics used by these stakeholders to hedge against inflation and
manage the risks associated with economic instability.
Finally, the case study reveals a rich tapestry of stakeholders in the Philippine
economy who are affected by and respond to inflation. Reflecting on the various
perspectives of government officials, business leaders, the general public, and
financial institutions broadens our understanding of the complex dynamics at work
and informs potential strategies for achieving a more stable and inclusive
economic environment in the face of inflationary pressures.
VI.
ANALYSIS
As a critical global economic concern, inflation warrants a comprehensive
examination using economic theories and models. Correlation and regression
analyses are critical tools for deepening our understanding of economic dynamics.
We can discover valuable relationships by conducting a correlation analysis of key
indicators such as money supply growth, GDP growth, and inflation rates.
Meanwhile, regression analyses provide a quantifiable measure of the impact of
various inflationary factors. These studies have the potential to reveal the complex
web of interconnected variables that influence global inflation trends.
Tables that break down the various components of inflation, such as demandpull, cost-push, and built-in inflation, can provide a thorough understanding of the
causes of inflation in different regions. We can gain valuable insights into how
central banks address inflation through their monetary policies by conducting a
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comparative study of interest rates and inflation in major economies, presented in
easily accessible tables. This method allows for a more in-depth examination of
the effects of inflation and the measures put in place to control it.
Understanding economic perspectives is highly important. When looking at
monetary policy, it is necessary to analyze how effective inflation targeting
mechanisms are and the difficulties that central banks face in a globally
interconnected economy; this offers valuable insights into policy results. It is also
beneficial to examine fiscal policies, such as government spending and taxation,
by studying past data to grasp their effects on inflation rates. Additionally, the
dynamics of exchange rates should not be overlooked, and visual aids like graphs
and tables can help illustrate how currency fluctuations impact inflation.
When addressing inflation, it is critical to consider alternative solutions. This
entails carefully assessing the effectiveness of supply-side policies such as
regulatory reforms and technological advancements. Furthermore, while global
policy coordination is difficult, it may offer advantages in managing inflationary
pressures. Furthermore, to address the exacerbation of social and economic
inequality caused by inflation, it is critical to investigate inclusive economic policies.
This multifaceted examination emphasizes the importance of taking a
comprehensive and coordinated approach, taking into account various economic
perspectives and potential solutions to mitigate the effects of global inflation.
VII.
POLICY IMPLICATIONS
This analysis highlights the complexities of global inflation, emphasizing the
importance of addressing it holistically. The importance of government policies and
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actions in dealing with the situation cannot be overstated. The use of correlation
and regression analyses to inform monetary policy adjustments is one key aspect
identified in this analysis. Furthermore, when refining their inflation-targeting
mechanisms, central banks must carefully consider the challenges posed by the
global economy’s interconnectedness. Competitive studies on interest rates and
inflation among major economies can also provide useful insights, allowing
effective monetary measures to be implemented to ensure stability.
Furthermore, delving into detailed analyses to gain a thorough understanding
of the various factors involved in inflation can be a valuable resource for
policymakers in developing effective strategies. As a result, policymakers must
consider key findings from previous data on the impact of government spending
and taxation on inflation to implement fiscal measures that are consistent with
these insights. The assessment emphasizes the importance of not overlooking the
role of exchange rates in inflation, emphasizing the need for governments to
consider implementing measures to mitigate the impact of currency fluctuations
which have the potential to drive up inflation.
By investigating various options, such as supply-side measures and
technological advancements, it becomes clear that implementing regulatory
reforms can help to reduce inflation. As a result, governments must assess the
effectiveness of these strategies in increasing productivity and reducing cost-push
inflation. Despite the challenges, international policy cooperation appears to be a
viable option for dealing with inflationary pressures. Nations can devise more
effective strategies and jointly address common economic challenges by working
together.
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Furthermore, the urgency of inclusive economic policies emphasizes the social
impact of inflation. Governments must investigate proactive measures to address
the widening gap in social and economic opportunities caused by inflation. This
could include launching targeted social programs, launching education initiatives,
and enacting labor market reforms, all with the goal of ensuring that the fruits of
economic progress are distributed fairly among all individuals.
To summarize, finding effective solutions to the complexities of our analysis
necessitates a comprehensive and coordinated policy approach. Governments
must use economic theories, correlation and regression analyses, and a thorough
understanding of inflation dynamics to design policies that are tailored to their
specific economic circumstances. A dynamic approach that integrates monetary,
fiscal, and supply-side measures, as well as promoting global cooperation and
inclusion, is critical in mitigating the global impact of inflation.
VIII.
CASE RESOLUTION/ OUTCOME
The Philippine government is dedicated to guaranteeing food security by
enacting policies that increase agricultural productivity and promptly helping those
most affected by inflation. In November 2022, the headline inflation rate in the
nation increased to 8.0% from 7.7% in the previous month, and the inflation rate
for the year was 5.6%. The main causes of inflation in November 2022 will be
services and non-food products like electricity, food and beverage services, and
transportation services.
A higher rate of inflation was observed in most major commodity groups,
especially in food and non-alcoholic drinks, which increased to 10% from 9.4% in
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the previous month. Typhoon-related lower production and increased input costs
resulted in higher pricing for fruits, vegetables, and rice. The Development Budget
Coordination Committee increased their 2022 inflation estimate to 5.8%.
To lessen the effects of rising costs for necessities, particularly for low-income
earners and vulnerable groups, the Philippine government relentlessly applies
targeted subsidies and reductions. A total of 9.8 million identified beneficiaries who
are most impacted by the ongoing increase in commodity prices will receive
PHP5.2 billion last week from the Department of Budget and Management as part
of the third tranche of the Department of Social Welfare and Development's
Targeted Cash Transfer (TCT) program.
In addition, the government is assisting the agriculture industry through the
implementation of initiatives aimed at bringing down input costs, strengthening the
agricultural value chain, developing innovations, and offering financial aid in the
form of gasoline discounts. For the purpose of providing citizens with services more
quickly and efficiently, the head of NEDA emphasized the significance of the
government's digital transformation.
IX.
LESSON LEARNED
This Case Study serves as a poignant reminder of the complex interplay of
economic forces and policy choices. As we watch the unexpected rise in inflation,
it becomes clear that the global economy is so intertwined that even seemingly
insignificant events can have a significant impact on a country’s economic strength.
This interconnectedness emphasizes the importance of monitoring not only local
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economic indicators but also international events that can influence inflationary
trends. The Philippines' inflation problem is a result of the intricate interaction
between internal and external variables. The nation has faced difficulties recently,
including supply chain interruptions, rising demand for products and services, and
growing susceptibility to changes in the price of commodities globally. In addition
to government fiscal policies, the Bangko Sentral ng Pilipinas (BSP) is a key player
in the implementation of monetary policies aimed at stabilizing prices. To combat
inflation as the Philippines navigates ongoing economic uncertainty, a
comprehensive strategy that takes into account both local and global dynamics is
needed. This strategy emphasizes the significance of monitoring and adjusting
policies to preserve economic stability and safeguard the purchasing power of the
populace.
X.
CONCLUSION
In "Riding the Economic Rollercoaster: A Case Study analyzing the Causes
and Consequences of Inflation in the Philippine Economy," the case study aims to
disentangle the complex network of variables influencing inflation's worldwide
effects while focusing on the country of the Philippines. With a focus on economic
theories, empirical data, and policy implications, this investigation offers a thorough
analysis of inflation and helps to create a nuanced understanding of this
phenomenon.
Through the study of diverse theoretical frameworks and economic models, the
research illuminates the complex dynamics of inflation, attributing it to elements
like the expansion of the money supply, demand-pull and cost-push forces, and
the intricate relationship between globalization and international trade. The
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Philippine context sheds light on the local implications of inflation, including how it
affects consumer purchasing power and the difficulties the country faces in the
face of internal dynamics and changes in the global economy. The study
emphasizes the value of economic instruments that provide insights into the
interrelated factors influencing trends in inflation around the world, such as
regression and correlation analyses. In order to lessen the effects of inflation, it
highlights the necessity of a comprehensive approach to policy-making and
advocates for well-informed strategies that combine supply-side, monetary, and
fiscal measures with international collaboration and inclusive economic policies.
Furthermore, this research highlights the importance of being vigilant in keeping
an eye on both local and global economic indicators by serving as a reminder of
the complex interplay between economic forces and policy actions. It emphasizes
the necessity of flexible approaches designed to handle the intricacies of the
inflationary problems facing the Philippines, highlighting the crucial responsibilities
that the BSP and government fiscal policies play in maintaining price stability and
economic stability.
In conclusion, this case study is a valuable resource that provides an in-depth
understanding of the worldwide dynamics of inflation as well as its particular effects
in the Philippines. It promotes a comprehensive and dynamic approach to policy,
emphasizing the need for ongoing observation, flexible policy modifications, and a
coordinated effort to protect the public's purchasing power and financial stability in
the face of changing economic uncertainty.
XI.
REFERENCES
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
Barone A. (2022, November 23). What Is the Quantity Theory of Money:
Definition and Formula. Investopedia.
https://www.investopedia.com/insights/what-is-the-quantity-theory-ofmoney/

Carson, C., Dziobek, C., & Enoch, C. (2002, September 25). 4 Information
Requirements of Inflation Targeting in the Philippines.
https://www.elibrary.imf.org/display/book/9781589061323/ch004.xml

Hooven K. (n.d.). Phillips Curve. Econlib.
https://www.econlib.org/library/Enc/PhillipsCurve.html

Bangko Sentral ng Pilipinas (BSP): The official website of the BSP
(https://www.bsp.gov.ph/ ) provides reports, publications, and statistical
data related to inflation and the economy.
 Mapa, C. D. (2023, September 5). Philippine Statistics Authority |
Republic of the Philippines. Psa.gov.ph. https://psa.gov.ph/priceindices/cpi-ir

Philippine Statistics Authority (PSA): The PSA (https://psa.gov.ph/ ) is a
government agency that releases inflation reports and other economic
indicators.
 PH GOV’T TO ALLEVIATE INFLATION WITH CONTINUED TARGETED
SUBSIDIES, — NEDA - National Economic and Development Authority.
(2022, December 6). National Economic and Development Authority.
https://neda.gov.ph/ph-govt-to-alleviate-inflation-with-continuedtargeted-subsidies-measures-to-boost-food-production-neda/
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
World Bank: The World Bank's Philippines page
(https://www.worldbank.org/en/country/philippines ) offers economic data
and reports, including information on inflation.

International Monetary Fund (IMF): The IMF's country page for the
Philippines (https://www.imf.org/en/Countries/PHL ) provides economic
analysis and reports.

Mendoza, R. L. (2023, June 24). How Inflation Works. Golden Haven
Memorial Parks. https://www.goldenhaven.com.ph/blog/how-inflationworks/

Cuyco, J. (2022, July 6). That high: What you need to know about inflation
in the Philippines. Interaksyon. https://interaksyon.philstar.com/trendsspotlights/2022/07/06/221496/inflation-philippines-explainer/