This work aimed to investigate the causal relationship between money and inflation (proxy by CPI) in the Philippines using Vector Autoregressive (VAR) Analysis and the Granger Causality Test. The results showed that both series are stationary in levels; hence, VAR in levels was utilized. The results of VAR(2) show a link between the two variables. The current inflation rate in the Philippines is affected by a one-year lag in money supply. The Granger causality test revealed the unidirectional connection between inflation and money. Furthermore, past levels of price stability can be used to forecast monetary stability in the Philippines. Technically, CPI Granger causes M2. JEL: E31, E52, C32, C53, C58 Article visualizations:
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Sabado et al. (2024) studied this question.
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