FINANCING THE BUDGET DEFICIT IN A SMALL OPEN ECONOMY THE CASE OF THE PHILIPPINES 1981 1986 by MamaSocorro H Gochoco WORKING PAPER SERIES NO 88 10
September 1988
Philippine Institute for Development Studies
TABLE
List
of
Tables
List
of
Figures
OF CONTENTS
1
Introduction Review
of
Section
Related
Literature
I
12 the
Financing
of
Empirical
Methodology
Summary.and Section
5
12
Deficit and
Results
1.4
Conclusions
20 23
II
Empirical
Results
Further
Tests
Summary
and
29 31
Conclusions
34
References
60
Appendix
A,.I
62
Appendix
A.II
63
Appendix
A.III
65
Appendix
A.IV
68
Appendix
B : Results of the Likelihood Tests on the Validity of Cross-Equation Constraints
Appendix
r
C : List
of
Variables
Ratio the 71 72
LIST Exhibit
I: Measurement
OF
of
the
Budget
I-A:
Financing
Table
I-B:
Private Holdings of Outstanding Government Securities
II
-
VI:
Budget
Deficit
Table
Tables
the
TABLES
F gure
F gure
F gure
F gure
F gure
I-A.I
I-B
Financed
of Deficit Borrowing
Financed
: Proportion of Defici_ Foreign Borrowing
Financed
: Private Holdings Securities
II-A
43
Deficit -
: Proportion Open-Market
I-A.3
38
o.f the 53
FIGURES
: Proportion of Money-Creation
I-A.2
Deficit
Results of the Joint Estimation the Forecasting EQuations and Interest Rate EQuation
.LIST OF •Figure
37
by 40 by 41 by 42
of Government 44
: Ratio of Deficit Outlays, Quarterly,
toInterest 1979-1986
45
Ratio of Deficit Outlays, Monthly,
to Interest 1981-1986
46
lllB:
F gure
II-C
:
Budget
Deficit,
Quarterly,
Figure
II-D
:
Budget
Deficit,
Monthly,
Figure
II-E
:
Interest
Payments,
Quarterly
49
Figure
II-F
:
Interest
Payments,
Monthly
50
Figure
III-A
Figure
Figure
Figure
III-B
IV-A
IV-B
:
First Difference of Deficit to Interest Quarterly, 1979-1986
: First Difference of Deficit to Interest .Monthly, 1981-1986 : 91-Day Treasury 1981-1986 : 360-Day Treasury 1981-1986
Bill
1979-1986-1981-1986
the Ratio Payments,
47 ---
of ---
the Ratio Payments,
48
51
of 52
Rate, 58
Bill
Rate, 59
FINANCING
THE THE
BUDGET
CASE
OF
DEFICIT THE
IN
A SMALL
PHILIPPINES,
OPEN
ECONOMY:
1981-1988',
by M_RZ_
The GNP)
in
inter:est the
large
"crowdin._g budget
out" deficit.s
until
real
For deficits for
experiences America
flnar;ce.
means
important the by
a
renewed
f_assive
as
finance
a.s
In
united
such of
such
to
as
export much
states
as
have,
capital
inflows
appreciation.
countries,
the the
success
of
1 i beral
cited.
their
equally !r,
to Topics
issues,
those
(relative
rise
economy
ir,
often
given
accompanied
the
deficits
and
etressed
of are
as
rate
developing
the
become
been
exchange
is
def;cTts
such
recently,
and
have
Open
have
GOCHOCO*
public
large
.journals.
H.
expected
countries
of the
and
macro-economic
effects
pervade,
current
western in
GOCQRRO
manageabil
literature i zati
southern McKinnon
as on
cone
ty a
budget
prerequisite
programs. countries
and
of
Mathieson
The of
Latin
state,
Visitin9 Research Fellow, PhilipDi_e institute for Oevelopment Studies, and #_:sociate Profe_ssor of Econo_ics, University of the Philippines School of Ecoi_o_,:c5. The author acknowledges the support -,.gfthe Phili;>_>ine Ins t/,t::te for Oevelopmen t Studies and the UP Faculty Research Fe.iJowship Fund. The study" has benefited from the. comments of Mario 8. lanlberte, research assistance from Ma. Corazon M. Eb,:_rvia, and secreta:-ial assistance from Merle L_OnZ
a I eS.
2
"Thus the swing from deficit to surplus in the true government accounts, where the monetary system is appropriately consolidated with the treasury accounts, is all the more remarkable and was a necessary condition for fully liberalizing the Chilean economy."t
Conversely,
"The lack of fiscal control should have discouraged the Argentinian authorities from proceeding with a full-scale financial liberalization similar to the one undertaken in Chile."2
As developing schemes
in
important will
their
to
be
and
There proposition
bonds
generated
1
McKinnon
2
Ibid-
that
with
respect
to
in
macro
a the
(1974)].
the
the
the
that the
and
the
public
present
bonds.
between
trade
tax
it
is
such
schemes
and .persistence
of
budget
they
are
revival
of
manner
of
financed.
the
invariance
financing
govern-
rational
expectations
Specifically,
this
presence
value
of
of
bond
1981,
future
neutrality
current tax
of this
financing
p.2-
lite-
inter-generational
the
The :implication
Mathieson,
affairs,
outcome
to equate
and
liberalization
of
in which
been
with
the
size
also
with
distinction
mind
has
allows
by
and
manner
holds
transfers the
the
[e.g. Barro
proposition
financial
by the
expenditure
rature
proceed
in
impinged
deficits
ment
bear
countries
is
value
of
liabilities is that
the
irrelevant.
3
In contrast,_
_raditional
bonds
.net wealth._which
raises
and
interest
Indeed, of
debt
interestl
Friedman, effects the
is
rates
for of
money
deficit
by
levying
taxes. of
public. Kochin
if printing
money
financing
increasing financed bank
of
excise
leads
of
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an
on
by a rise
in
debt
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within
hands
be
of
the
government
rate
of
of the balances
price
also
looked
excise
the
policy.
money
can
future
is the
financing
the
or the
of
monetary
existing
its
taxes)_
however,
money
in
finance
are
the of
increase
deficit
demand
in
realm
tax
to
finance
views
in
expenditures._
important,
the
however,
the
level. upon
as
to
be
taxation
on
balances. 3
It
has
been
bond-financed be
within
expansion
future
up
effect.
the
implies
end
on
expansionary
can
of
effects
out"
government
EQually that
p.388),
a form
Money
methods
bonds
as
the
the
of
the.
from
such
(which
policy.
lies
(1974,
deficit
bonds Both
of
arise
the
monetization
that
finance
therefore,
fiscal
This
to
examined
"crowding
posits
spending
used
issuing
proposition
the
of
investment.
have
addition.,
issue
consumption
private
as mitigating
hence,
government
In general,
realm
and
upon
example,
supply
out"
In
the
raises
studies
out".
looked
that
in turn
empirical
"crowding
government
holds
"crowding
numerous
degree
real
rates,
theory
increase
aonetized
at
payments
on
time.
Pure
because
of
some
the
bonds
bond its
inherent
recognized in
in
the
literature
government
point.
This
increase financing instability.
is
the of
that
spendin.9 because
size the
of deficit
the
even
will
have
the
interest
deficit is
a to
over infeasible
4
If money paradigm,
there
.policy
is
ineffective.
the
different
deficits
and,
validity
out '_
however,
that
budget
markets with
"crowding
sector
course,
financing•. degree
the
of
"crowding
deficit
raise•interest
rates.
the
"crowding
there
is a dearth
This attempts public
study to
debt
rates
rather
is
rise
in
response
While
the
other
exist
divided
into
whether public
for
can
two
there
of
result
for
credit
government
debt
to
by the
factors
which
studies
of
countries
_,
.countries.
sections. is a rule
degree
financing
developing
If
markets,
'the
developed
discern.
a
a
as
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for
Under
which
market
numerous
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financial
be measured
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to
demand
without
literature
determine that
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Note
degree
degree
is unsatisfied
liberalized
by
on
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may
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rates,
out"
out'i effect of
•or
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liberalized
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on
the
countries,
depend
.interest
on
empi.rically.
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although
exist
Under
developing
only
deficits,
perspectives
case
credit
not
financing
tested
of
between•
is
specifically
captured
for
borrowing
of
can be
been
partly
Money
of view
on
demand
government
of
have
is
variables.
out"
ceilings
out"
of
the
"crowding
financial
which
exists, in
of
to
of
expectations
relationship
point
"crowding
the
long-run
the
of
may,
rational
from
financing
of
is no
the
real
The
private
in
and
monetary
regime,
as
growth
irrelevant
measure
neutral,
then
money
but
is
The for
there
first
financing is,
then
5
presumably, public
bonds
can
public
are. not
see .the
saves
future
an amount
taxes
.and an ex-ante
is no
discernible
bond
1_sues
wealth,
traditional
to
present
the
out"
effect
financing,
be perceived
raising
.net wealth.aince
.implicit
"crowding for
of
taxes
equal
rule
can
part
as
consumption
"crowdin_..out"
them.
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value_of occurs.
public
adding, to
and
in
.ithe
.If there
debt, the
interest
future
t.hen such
public's
net
rates.-...via the
effect. ..
The
second
first
in
out"
effect,
to
that
section having
if
any,
empirically,
interest
Review
of
.effects.
Keynesian
incomes the
changes._in
its.
nature an
impact
o_
on
of
the
attempt
posits
fiscal via
by them.
policy
the
"crowding
will
be
made
nominal, and
real
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non-
current
This
_s
modified
effect effects
which
interest
rates.
manner has
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the of
in
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the
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latter the
public the
caveat Ricardian
arising An
which equivalence
has
demand
disposable ..somewhat from
important
reacts
potency,
the
direct_
in
monetary
raise
have
t_he changes
subsequent
policy
It
exists,
analysis
on consumption
the
revival
that
the
consequence
Literature
income.induced
in
natural
determined
determine
Related
dietortionary
that
a
rates.
Early
by
is
to
higher
caveat the
is
changes
of..pol_cy.
given
rise
proposition
to
the [See
6
Kochin
(1974),
proposition manner
to
in
Tanner
asserts
that
a change
deficit. and
and
A
tax
households the
present
the
debt. would
posits
that
generations
at the
taxpayers
will
bequests
to be
of
Today's
expense increase
future
the
same
as
if
deficit
needed
equal to
therefore, Barro
(1974) depends
generations will,
heirs.
their
savings
as
these
therefore,
Instead,
not today's
so
including
to
service
generation
future
same
implicit
demand,
their
the
the
government
predictions,
today's
generations,
the
an amount
,taxpayers
of
in
in
liabilities
save
on aggregate of
equivalence
government
payments
utility
overlap,
consume
would
utility
on the
the
Keynesian
be no effect
indirectly
would
to
the
change
tax
interest
Contrary
there
a
future
they
of
Ricardian responds
increase
the
Thus,
The public
and
would
perceive
value
the
taxes
cut
deficit.
the
in
(1979)]o
that
their
government
government
deficit
debt, had
not
occurred.
Many model to
to
net
the
of
the
test
early whether
wealth
or
proposition
that
wealth
as
there
future
taxes
at
Aschauer to
the
(1985), contrary.
not.
empirical government
(1982) debt
no evidence
all. and
debt
Feldstein
government is
studies
Tanner Seater
and
use is
a
life-cycle
perceived
finds
support
constitutes that
(1979), Mariano
part
consumers Kormendi (1985)
toadd
find
for of
net
discount (1983), evidence
Feldstein
(1982)
equivalence out"
expenditure an
if
a change
in
reason
to
believe
It
is
in
one
is
occur
concurrently.
government
spending
in
years
spending.
and
A rise taxes.
depends
In
not
_signals
in
so much on the
regarding
saving
were
private saving it
were
would that
an
signal
may
policy
i,n
spending
finance a:,rise
on
consumption
policy
which
such
signal
effect fiscal
occur,
increase
higher
also
the
to
necessari.ly
taxes_to,
present
future
government
in
may
case,
in
,eĂ—-ante
only
possible
taxes
either
the
demand
higher
current
calls
Ricardian
on aggregal;e
that
year
the
changes
private
also
hence,
he
that
effect change
there
future
no
concurrent
Even no
have
about
what
He argues
would
induced.
and
effect.
equal
future
skeptical
proposition
"crowding
if
is
but
in
on the
current
policy
'\,..
conveys.
In
Feldstein's
Proposition
focuses
needed
to
policy
has
policy
independent
of
fiscal
case
of
Feldstein,
service
existent debt the
more neutrality
debt,
policy
need
the
Ricardian Remolona of
in
the
LDCs,
capital
debt not
result
Ricardian future
out
the
that
Ricardian
as-
it
would
The hence, not
fiscal of
The would
be
fiscal potency in
the
proposition;
also
Like
skeptical
about
equ_,valence
LDCs generally
and
current course
equivalence is
liabilities
obligations.
be negated
(1985)
equivalence
tax
future
service
markets.
efficiently
on
He points for
of
the
entirely
implications
significance especially
view,
have
create hold
proposition,
fragmented,
government
can net
since
:the
or
also
offer
wealth. taxes
non-
Also, tend
to
8
be
distortionary
from
taxes
and
needed
(1982)
real
per
excluding the
social
security
revenues,
the
of
Meyer
consumer
market
holdings
of
government
the
coefficient
holdings being
of
government
discounted
coefficient significant, They
on the
conclude
period real debt
completely.
on
this and that
there
zero,
is
than is
that no
or
of by
taxes
equation
equation They of
then find positive, on net
evidence
of
real
households the
private
of private
value
They
variable
]arger
debt
market
well
Feldstein
a function
1953-69.
is
as
single
worth
The
from
demand.
value
debt.
the
vice'versa,
a
net
real
the
for
real
the
arising
.spending
as
government
and
data
expenditures
tax of
regressors,
use
future
debt
problems
on aggregate
of
sector,
net
and
(1976)
the
holdings
U.S.
and
the
of
spending,
government
effects
permanent
value
government
among
income,
excluding
the
of
19.30-1977,
of
wealth,
in
effects
model
from
function
consumption
changes
real
disposable
using
private
on
and
equation
some endogeneity
substantial
of
a
transfers,
taxes
Yawitz
single
benefits,
that
have
model
of
collinearity
concludes
substitution
debt.
a
as
Despite
effect
be
consumer.expenditure
government
aspotential
can
capita
value
government.
the
uses
1941-1946,
income,
would
to service
Feldstein U.S.
there
is
sector estimated
posit
that
private future
instead
if
sector taxes
are
that
the
statistically private that
wealth. consumers
9
discount
future
constitutes
part
In
his
taxes
.even
of
wealth.
net
comment
criticizes
partially.
on
their
the
specification
omitting
numerous
sources
variables
such
by
the
as
current
variations
paper,
of of
accrued
income.
disposable
rate
to
disposable
income,
(1979)
equation,
life-cycle
income,
debt
Tanner
their
unemployment
in
Government
is
Including
income
account
for
adjusted
for
more
cyclical
in
keeping
Q
with
the
Using
spirit
U.S.
data
on
government
He
concludes
Kormendi
the
the
debt
types
public
no
of
future
coefficient
not
that
from net
Seater
zero.
wealth.
and
Mariano
consumption
of
have
been
devised
the
future
tax
financing
the
is
related
consumers
discount
liabilities.
Kochin
(1974)
the
amount
period. security
permanent
income
of discounting
Feldstein
(1974)
payments
reduce
test
whether
implications
a real
of Tanner
balance
effect
98 percent uses
US
Munnell savings
of
Friedman's
hypothesis
using and
tO
deficit,
that
finds
a significant
social
and
of
of
that
tests
the
specification
1952-71
is
existence
and
tax
the
approach.
different
debt
(1985),
perceives
investigates
Canada
that
statistically
evidence
methods
(1970)
he finds
government
Aschauer
life-cycle
deficit.
alternative
in
is not
find
budget
Ando-Modigliani
1947-74,
that
also
Other
the
for
(1983),
(1985) to
of
and
data
finds
over
the
(1974)
find
in
U,S,
the
10
Barro's
(1978)
payments
study
do not
Recent
affect
studies
financing
shows,
aggregate
on
the
government
public's
net
assumed
to
include
however,
have
public's
been
be. characterized
security
behavior.
perception leads
applied
(1982),
of
to to
by market
by Plosser
social
consumption
expenditures
wealth
studies
that
whether
changes
in
financial
market_
efficiency.
Huang
the
These
(1986),
and
Evans
(1987).
Plossser purchases
(1982)
are
on U.S.
negatively
treasury
associated cannot
bills,
with
inflation
interest.
While
this
is
taxes
or
interest
rate
movements.
finance of
perceives for
base
that
future
to
that
the
debt
the
case,
he
for
taxes
What
also
is
mitigate
in.
rate that
using on
is that
the
trades
a shift the
the
of
no bearing
means
Furthermore,
not
increase
finds
merely
there
he
real
has
are
However, an
the
this
government when
to
in
returns
innovations
rates. due
government
nominal
these
increase
finance. does
is
in
excess
interest
money
taxes
deficit
government
implying
an
for
taxes
to
this
or
innovations
retated
whether
expected
public
that
highernominal
determine
debt
finds
current from
tax
monetization
"crowding
out"
of
real
effect.
Huang .returns the
(1986) instead
neutrality
modifies of
excess
proposition,
Plosser's nominal since
study returns the
in latter
using
order does
to
test
not
rule
11
ouran
effect
impact
on
equities bond
on
real and
and
returns.
debts
bill
nominal
markets.
in monetized
affect
returns.
the
same
stocks. equivalence that
liabilities also
real
and
finds
present,
results
increase
no or
rates.
.He debt
are
does
rule
uses
data
on
those
finds
or
budget
respond
evidence budget
to
not
arrives
at
with
of
the
correctly
deficit
entails
deficits
do
he
public
support
government
debt
case
by saving
an
contemporaneous
tests, the
out
corporate
the
privately-held
in
the
on
that
consistent
that
in the
they
future
to
except
proposition
the
also
but
In multi-market
conclusion His
He
in addition
innovations real
returns
common Ricardian perceives
more.
future
the
thesis
lead
to
Evans that
higher
tax (1987) past,
eĂ—-post
2
Financing
of
The
Deficit4
proportion
creation, monthly
the
domestic data
calculated
are
in the
shown
in
following
deficit and
financed
foreign
Table
I-A.
This
takes
by
money
borrowing
using
These
ratios
are
way:
holdings of government debt by the Central Bank
the
Aholdings of required reserves :,
-
= Budget
measure
prescribed
required
the
borrowing,
Proportion .of Budget Deficit Financed by Money Creation
ratio
of
into
account
the
reserve
the
Central
Bank
and
by
reserves
Deficit
are
a
leakage
from
requirement
recognizes
the
money
that
creation
process. A holdings of government debt by the private sector, trust funds, and semigov't entities
Proportion of the Budget Oef.icit financed by domestic market. borrowing
The
entities
banks, private Those
included
Fund.
Finally, 4
in
The . I .
the
private
investment
corporations,
Economic
Exhibit
Budget
b_nks,
Fund,
of
=
included
thrift
A holdings reserveeligible securities
and
Support
and
semi-government
measurement
of
the
are
commercial
insurance
companies,
private
funds
Fund,
sector
houses,
other
undertrust
Deficit
indirect
are
the
Industrial
entities budget
Bond
Sinking
Guarantee
include deficit
bearers.
the is
Loan Social
shown
in
13
Security and
System,
the
Government
Philippines in
the
are
order
holdings because
Service allowed
to
meet
of
reserve
this
Development
is
Bank
Insurance to
hold
reserve
System.
is
apparent
creation
effectively
of
the
policy are
has larger
The
policy IMF
has
The because Domestic
yearly the
in
short
(123.13)
for, for
means since
as
subtracted
supply.
of
the
by
money
that
monetary
required
reserves
a proportion
show
probably
the
how
of
the
contractionary
in response
to
borrowing of 1985
time
11 months
June
tends
Domestic
July
is
to
the
strategy.
borrowing
and
This
also
1983,
average
periods
most
debt,
....averages
figures
borrowing.
in
Deficit
that
contractionary
since
stabilization
I-A
negative.
monetized
yearly
been
Table
quite
than
deficit.
change
government debt foreign sector
Budget
are
been
The
money
of the
the
securities
securities part
in
=
from
ratios
Banks
requirements.
Aholdings
It
th e Philippines,
reserve-eligible
eligible
Proportion of the Budget Deficit financed by foreign borrowing
of
1986 move exhibited
such
(-220.514).
as
of
seem
1986
to
be
is
outliers,
inverselywith dramatic those
for
unusual
foreign reversals April
1985
14
Empirical
Methodology
Table
I-B
government banks, has
very
other
has
period
1983.07
much.
It can
financing
of
8,
assumes
that
it promises Treasury and
to
semestral
1983.12
of
financing
rule
part
of
As
shown
1979-1986, approximating
net
the
last
with
which
the
it did
years
of
not
consider
then
six
this
exception
We
can
thrift
average
that
several
the
non-parametric
characteristics the
deficit only
pay
the
holder
each
which
the
be surmised
is
then
banks,
of
decline principal the
rule
payments.
(1984),
random
distributed,
in
over.
$1 ¢
one
interest of
$I per
Treasury
If is
a
negate
8
z
¢ via
bonds, and
Tests
Cox and The taxes are
independently
not
independently
potentially
discernible
the
is
bond
forever.
by
via
distribution outlays.
period
interest
procedures
the
is a normally
variable.
could
of
type
($1-t¢),
if 8
there
to
of
=
to determine
distributed
increased,
therefore
remainder,
performed
are
The
there
finances
the
increased.
to
privately-held
commercial over
Cox
ratio
of
holders)
to obtain
the
by
value
private
interest
utilized
par
held
rolled
Following are
the
continuously
is essentially for
Results
that
(debt
continuously
variable the
shows
debt
and
and
proposition
that
bonds
wealth.
in Appendix stem those
and of
A.I, leaf
a normal
using plot
of
Quarterly 8
distribution,
data
exhibits
for tails
15
The
average
value
deviation
is
2.16.
greater
than
unity,
the
average,
From
the
no tax
average
implication
are
the
over of
calculated
It
is
deviation
range
by
The
This
pseudo-standard
1.35.
possible,
as
was,
and
on
third and
between
Q3
In 1.35
a
normal
times to
the
calculate
inter-quartile
deviation
the
is
Q1 = 0.1235
is
closely
8
period.
first
the
pseudo-standard
deviation
the
therefore,
by dividing
of
1979-1986
3.6816.
range
standard
there
difference is
deviation
standard
that
as
The
the
value
the 8,
inter-quartile
deviation.
and
is
range,
a pseudo-standard
is
the
inter-quartile
distribution,
historical
Since
respectively.
the
standard
1.74
liability
boundaries
Q_,
is
distribution
Q_ = 3,38051, and
6
the
historical
quartile
of
is
2.727.
approximates
difference
the
between
them
0.56,
Another the
upper
whether
non-parametric and
lower
there
are
bounds
any
The •upper and
by multiplying
the
it
obtain
from
Q_ to Q_
bounds
obtain
obtained
Examination there
to
are
of
the are
the
values
no outliers.
values
bound,
normal
calculated
by
1.5
and
and
subtracting
bound.
The
8.83
and
-4.75,
Quarterly
a
seeing
are
lower
of
of B and
bounds
range
upper
calculating
assumi_t
lower
inter-quartile the
for
outliers,
distribution.
to
involves
procedure
upper
adding
and
it lower
respectively. 8
indicates
that
16
Appendix 1981.01 tails
to
shows
1986.12.
greater
than
average,
no
boundaries
tax
are
range
3.00
deviation
of
3.19.
upper
and
respectively.
for
8
1981.02,
To test 8 is
The
lower
which
are
whether
coefficient
on
significant,
suggesting
when
monthly
variable may
not
data
the
are
is significantly be a stationary
and
the
standard
is that
there
was,
on
and
4.05.
third
4.28,
the
pseudo-standard
historical
between
8
are
three
outliers
and
quartile
respectively.
The
standard
them
10.56
out these
is
0.19.
and
-5.84,
of
seventy-two
are
the
values
1982.05.
8 is non-stationary
against
exhibits
is
and
only
and
8
of 8
0.23
of
from
value
first
to
of
data
average
The
difference
bounds
plot
2.33 the
close
are
1981.05,
regressed
is
is very
There of
as
monthly
distribution.
implication
calculated
of
leaf
is
liability.
deviation
values
8 since
the
inter-quartile
The
of
Again,
unity,
and
using
of a normal
value
is 3.19.
results
stem
those
average
deviation
the
A
approximating
The
The
A.II
time. time
Using
variable
that used;
8 the
negative. random
or
time
quarterly is
not
data,
This
variable.
the
statistically
is stationary. coefficient
dependent,
However, on
suggests
the
time
that
8
17
--=_-
Quarterly 8 =
Data:1979.1-1986.4
1.8843 •(2.4458)
R2
=
-
Monthly
0.0039 (-0.0966)
TIME
0.00311 DW = 0.7265 F = 0.009 (Standard
Figures
II.A
budget
deficit
monthly
data.
6,
the
first
to
is not
must
8
be
in
TIME ''_
=_2;1385
the
ratio
, using
of
the
Quarterly
and
downward
8
series, shows
Quarterly
trend DRAT,
graphs
and
in was
of
monthly
the data.
anymore.
time.
time,
forecasting the
,
over
over
If
6
III.B
determined
distributed
of
the
and
distributed
debt.
graphs
of
0.0634 (_3_7812)
0.1696 _BW F = 14.30
a slight
using
evident
pendently
government
is
-
Parentheses)
payments,
III.A
be
independently
used
show
difference
of
=
in
there
Figures
trend
II.B
interest
difference
It
and
4.6485 (6.5980)
Rz
Errors
Since
first
obtained.
The
!8 =
Data:1981.01-1986.12
then
expected public
can
If 6
is not
inde-
past
observations
tax
liabilities
perceive
the
may of
future
tax
• '.
liabilities "Crowding as
the
the
implicit out"
public
interest
The
effect saves
partial
deficit
a la Ricardian
needed
equal
shown
in Appendix
to service
model
is
estimated.
Both are
for
A.III.
then
the
debt.
DRAT
using
Based
The
ex-ante may
present
the
coefficients
significant.
an
Equivalence to
autocorrelations
are
variables
the
an amount
payments
data
AR(2)
in
on
this,
on
the
,
occur
value
of
Quarterly an AR(1)
partial
AR(2) and auto-
18
correlations
for
Appendix
A.IV. on
quarterly 18,
the
and
respectively, at
chi-square k is
values
of
and
are
lags
29.18,
number
of
28.38, of
6,
and
16.08,
is
randomly
the
12,
18,
33.64,
indicates
that
k
degrees
and
45.55
with
7.11,
is
51.17
and
6,
66.47,
DRAT 14.62,
quarterly
12,
a less
DRAT
data,
the
Q-
18,
and
24
respectively.
exhibits
18,
randomly
9.53,
monthly of
12,
given
quarterly
lags
freedom
6,
there
that
the
statistic
for
Using
6
_z
Q-statistics 24 are
on
of
8 is
at
55.25,
Based
we find
of
auto-
quarterly
and
lags
and
lags.
indicating
monthly
at
accumulated
Therefore,
8 obtained
55.13,
8
that
distributed. for
Using
respectively,
probability
respectively,
statistics
53.61,
used),
0.005.
However, of
50.43,
freedom, of
a percent
for
with
in Both
significant.
long
37.15,
shown
estimated.
[Q(k)],
or
lags
• are
is
significant medium,
level
distributed.
:
are
(Xz)'
degrees
half
are
AR(2)
Q-statistics,
short,
the
significance
at
and
24
18.54,
24
than
model
statistics,
(where
data
AR(2)
indicating
correlations
monthly
an
AR(1)
data,
12,
using
Again,
coefficients
6,
DRAT
This
a pattern.
The
same
',._.
result are
.is
obtained
32.65,
In
52.76,
general,
distributed
over
the
of
over
exception time.
for
monthly
64.28,
and
the time
6 and
quarterly
DRAT where 77.59
series exhibits data,
for
is
the the
not
Q-statistics same
independently
a pattern. also
lags.
exhibits
DRAT, a
with
pattern
19
To test of is
6,
whether
the
data
regressed
data,
on is
occurred
in is
to
F
with
!979,1
2
to
-0,07 (-0.06)
which and
and
obtains data
8.
To
test
28
3.34
degrees
_'I'
significant
from
1983.3
test
a
+ 0,25 (2.45)
and
it
at
0.05
The
e xceed_,'t_e level
to
1986.12,
negatively
of freedom.
to
8 = 0.4 (0.21) R2 = 0.01
in
indicating
that
.+-0,03 (0.42)
TIME
degrees
on
of
F
3.07 of
at
freedom.
in
latter
a shift value 0.05
i_
DW = 1.7
F = 0.117 i.ii.._.',
1981.01
coefficient
the
calculated
value
from
the
case.
occurred of level
• in
4.234 of
,
1986.4
- ....
significant
significant
The
data
the
of
,,
TIME
F = 5.998
monthly
the
performed.
.).._83.3
"
Using
shift
-
1983,2
DW = 0.9
to
whether
)
R2 = 0.27
groupl
quarterly
that
is
5.863, is
each
a
suggests
Chow is
value
"
=
of
distribution/
Using
using
distribution
F-statistic
significance
8
that
the
the
groups
one
This
significant,
critical
two
1983.2,
while
in
variable.
significant.
the
calculated
into
a time
time
not
occurred
divided
1979.1
coefficient
shift
are
shift
against
•from
1986.4
a
to
1983.12
the
time
former Again, the
and
1984.01
variable
case
and
there
is
barely evidence
distribution
exceeds
significance
the with
is
of critical 2 and
B. F 68
20
1981.01 8
=
to
5,98 (4.98)
-
R2 = 0.13
,'
1983.12 0,127 , (-2.25)
DW = 2.4
indicate
that
there
the
does
behavior
section
discernible
attempts
rule
parametric
the
are
utilized
deficit
the
proportion is on
the
evidence
to
financing
to
independently-distributed
focus
to
1986.12 0,050 (1,649)
TIME
DW =
1,67
some
evidence
be
8 shifted
for
tests
of
be _he
-
Rz = 0.07
seem
of
-1.69 (-1,00)
=
to
over
F= 2.72
to
time.
and. Conc 1usi ons
This
ratio
6
F = 5...105
In general,
9Ummary
TIME
1984.01
of
public
interest random
for
indicates
debt.
whether
8
interest
a
non8,
is a
the
normal,
is assumed
by bond
principal
is
Several
variable.
payments
the
there
outlays,
financing
that
if
to determine
interest
rule
determine
to
issue.
payments
The since
is simply
rolled
over.
The random
evidence variable.
indicate time. the
that This
public
is
Equivalence the
it
that able
Theory, value
a to
is the of
is a randomly-distributed
its
is not
If this
present
8
However,
means
liabilities.
to
indicatesthat
time
series
independently discernible determine
so,
then
public their
properties
distributed rule
exists
their
save
expected
tax
whereby
expected
according
will
over
to
tax
Ricardian
an amount liabilities
equal and
21
debt
issuance
Debt
issuance
and
w_lnot
be
will. not
.viewed
haveany
therefore.any.discussion
as
adding, to_net
effect
of
a
on. real
"crowding
case
of
:.
is
evidence,
the
Theory
a discernible 8 is above
by & over
of
rule.
with
public
can
time,
there
is no
liabilitie8.
The
tax
"subsidy"
via
that
though
associated
the
average
there
the are
reason
issuance
the
value
of of and
no
tax
them
Chow
the
government
randomness
since
in
presence
future
payments.
pattern
for
is
Ricardian
interest
via
only
by the
both
this
that
despite
financing
discern
bond
suggest
First,
effect
:
advanced
be valid
not
as
to story
suggesting
behave
liabilities
future
may
unity,
the
the
financing
public
Since
however,
Philippines,
Equivalence
the
consumption
out"
irrelevant.
There
wealth.
exhibited
to
discount
i8 the
tests
degree
reveal
that
l
8 exhibited
The
a shift
over
implication
.discernible,
is
do matter
bond
issuance
adds
acts
as
there
in
though
such
issuance,
"crowding
out"
case
of
the
pursuit
hampered the
some
not
adverse
time.
in the
to are then
are
not
only effects
financing case
net
wealth
no
future
various
because tax
of This such
size
financing
of
means the
deficit,
these
If
government implicit
degree that
in
of the
Philippines,
schemes the
of
the
the
as
though
Philippines.
liabilities
liberalization
the of
rules,
the
discussions
countries,
by
of
irrelevant.
developing of
that
but
deficits
may
be
also
by
via
bond
_2 issuance. persist changes
It
also
until in the
that
these
the authorities
are
manner they operate.
of the traditional next section.
means
"crowding
out"
adverse
effects
able to make Determining
will credible
the degree
is the subject of
the
23
II
The
assumption
efficiency
is used
decisions the
of
study
to
on
interest
are
various
organized
rational
expectations
investigate rates.
The
T-bill
secondary
the
impact
of
interest
rates.
market
or
for
financing
rates
There
market
used
is a
well-
bills
Treasury
in
which
Q
justifies
using
particular
market.
closely
follow
Mishkin
(1983),
Huang
balanced
nominal (2)
rates
initiallyvia
A
traditional
where period
in
it
a
ceteris
in government
by
the
paribus,
spending
Treasury
interest
rate
debt
liquidity reverse
the
Fisher
equation theory
aiGt is
on
monetized
via
simple
=
(1987).
that
issued nominal
inflation
rates
it
(1982),
raise
held
via
a
by
"crowding
and
increases
interest
debt
raise
(3)
of
this
methodology
by Plosser
Evans
suggests
increases
in
effect;
and
studies
and
in
rates;
sector
ations
(1986),
budget
increases
out"
specification
related
theory
interest
private
in
efficiency
market
The
those
Traditional (I)
of
tests
the
+
nominal
effect, this
expect-
movement
in
effect.
characteristic following:
a2PDt
+
a_Mt
interest
bonds;
interest
or until
downward
is the
nominal
one-period
lower
G,
+ rate PD,
of
tests
a4Zt at and
of
(I) the •M
end are
of
one
measures
24
of
government
debt,
Z
lags
of
G,
sides
of
t-.l,
given
the
PD,
a vector
and
M;
expectations
where
(I),
the
subtracting
of
the
and
monetized
other
a_
=
where
biUGt
variables
are
coefficients
of
marRet
equation
b2UPDt
+
/ I,;-i)
UGt
_
Gt . -
E(Gt
/ It-l)
UPD._
_
PDt a4Z_
to
PDt,
be and
with
will
-
not
-
Mt
+
E(a4Zt
/
yields
(2)
It-l)
with
future
a true
and
Vt
the
contemporaneously. or
at
/ It_1)
uncorrelated
past be
E(PDt
both
available
(i).
b_UMt
E(it
to
efficiency,
from
-
uncorrelated (2)
+
information
it
Gt,
then
is the
E( • /It-t)
UI.t; _
is assumed
with
It-1
resulting
Vt_ Vt
operator
assumption
the
UIt
values
reduced
regressors If
of
Gt,
form
and
and
V_
is
not
PDt,
and
Mr,
the
bs
will
beconsistent.
In order measures rates, monetized
of
to estimate
the
government
Because
differences
of
movements.
not
the
unanticipated In
other
exist
nominal
it
of
privately the
forward
except
for
interest
component words,
is necessary
components
spending,
debt. does
the
(2),
unanticipated
Philippines
for
is
debt,
be estimated,
Applying
not
privately-held
.respectively;
including to
spending,
E(it
nominal held
forward
It-z)
interest and
in
the
cover,
are
nominal /
obtain
debt,
market
rate of
to
used interest
=
it-l,
first to
proxy rate meaning
25
that
the
.interest
rate
series
follows
a random
walk.
This
:.(
assumption
is not
For
the
equations
rejected
financing
including
question,
the
relevant determine
which
significant
at the
where
:
Zt-i
X_
The
variables
and
level
+
three
in
(3),
5
i' on
TB91
are
=
is
the
also
variables,
and
F-test their
hence,
0.982
graphg.
other
to
are be
jointly retained.
variable used
in question
to forecast
Xt
t-1
financing
equations
+
to
of coefficients
three
is
in
isutilized
lags
are
variables
time
regressed lag
(1.181) See
variables
financing
of
at
forecasting
When
efficient
particular
is a serially-uncorrelatederror
there
forecasting
(3)
particular
is a vector
Since be
and
linear
Ut
available
Ut
the
financing
is a Vector
a
of
used.
5%
_
is the
Zt_1
lags
are
S
Variables,
other
variables
X_;
empirically.
0.944 (22.901)
variables,
following
on not
term
1
significantly
TB91(-1)
lag
the
of
itself, different
there
will
specification
the from
co1.
26
The
GEt
:
Zt-1
aG
POt
:
Zt-1
u P째
Mt
z
Zt-i
aM
superscripts
concerned. with
the
+
Ut G +
(3b)
Ut M
the
(3b),
following
Ut P째
+
indicate
(3a),
(3a)
particular
and
version
(3c)
(3c)
of
are
financing
then
variable
estimated
jointly
(2)-
n
it
-
it-1
:
be
+
Z
gi G
[GE-
Z_.-1 am]
L = (> t'l
+ Z
_.iP0
[PD
-- Zt,.-]
a PD ]
i =o n
+ Z
f3_M
[M - Zt..L
a'_]
+
to
be
e_;
(4)
i =0
where
the
as
in
corresponding b
as
Tests
conducted
of by
in
the
the
in
following
va]
where
of
(3a),
is
c
c
-
the
SSR
number
is
u
is
'test-statistic number of
whether
market
the
rejection
of
the
failure
the
sum
(4)
to
be
with
and
constructed
is
the
observations
of
squared
sum
of
the
of
the
the
or
of
the
squared
as
constraints
of
a
.where
economic of
the
therefore, of
these-
x2(q)
not
form
known
both
residuals
the
system
constraints, one
residuals
eystem
appropriateness of
are
and
statistic
of
participants with
indicates
constraints
is distributed constraints.
validity
consistently
the
u ]
unconstrained
The
to
(3c). 6 _-_ i_ _l_s_med
(3c),,
test
constrained
The the
these
(_Xb),
Yhe
[SSR
n
SSR
and
equal
manner:
log
SSR
(3b),
idity
constraints_
2n
constrained
(3a),
estimating
without the
(4) are
only
their
is
indicates expectations
structure model
q
but
also R
specified. could
be
due
to
27
to
be
uncorrelated
identify
the
Bts
_t
is modelled
Et
:
Et-1
+
the
debt,
log
and
linear
and
as
.the regressors obtain
in
consistent
a first-order
(4)
in order
estimates
autoregressive
to
of
them.
process
i.e.,
Nt.
Following are
with
Plosser
of
the
the log
forecast
,(1982),
monetized of
of
the
debt,
government
a policy
three the
policy
log
of
privately-held
expenditures.
variable,
Xt
variables
The
is defined
optimal as:
E(x, / It-l)
where
It-i
forecast
is
defined linear
as
is
the
available
conditioned the
forecast
different
sets
equations
indicates
policy
of
uncorrelated.
with
on which
innovation
between
actual
uniform
lags
explanatory at
equations.
forecasting
The
set
Xt
in
and
the
Xt
the
is
optimal
Xt.
Experimentation
forecasting
on.
difference of
information
least The
variables two
error
.eQuations
of
is
5 and in the
in each
assumed
lags
of
forecasting
potentially term
10
appropriate of the
to
be .,
three
serially
28
In the of
first
5 of each
government
of
and
index.
the
the
is
not
predicting
In variable
from
is
regressed
results
the
author.
Appendix
C.
set
the
do
as a
log
of
foreign
Philippines, the
proxy
could
of
exchange
in the
in the
index,
log
•production
in predicting
money
against
of
intervene
basis,
of
debt,
lags
be
money
for
useful
GNP in
demand.
forecasting uniform
equations,
lags
of
10
each of
the
variables.
The
December
and
used:
industrial
be useful
monthly
taxes
second
Thedata to
a
log
the
production
the
policy
of
allegedly
could
on
future
rate,
uniform
are
monetized
authorities
as •they
Industrial
which
three
monetary
rate.
of
interest rate
equations,
regressors
log
growth
market,
exchange
supply.
following
debt,
If the
exchange
the
of forecasting
expenditures,
privately-held rate,
set
are 1986.
of
the
monthly,
F-test
are
covering
A description
available
the
of the
period data
upon
request
January is contained
1981 in
29
Empirical
Results
Traditional government
theory
spending
and
significant3y
positive.
significant]y
negative.
On ._he other that
government
private the
manner that
implies
the
do
not
coeficients
unanticipated
money
different
tom
This
of
nominal that
the
interest
(3a),
rate,
net
wealth
rates
are
independent
theory,
not
of
is financed.
not
the of This
privately-held be
while
significantly
precluding
government
•any
spending
precludethe spending
be
posits
the
unanticipated
financing
De
should•
to
government
II presents (3b),
equations the
in
on. money
Theory
should
does
should
on
possibility affect
nominal
rates.
Table
of
of
rates,
innovations
interes_
of
manner
debt.
spending on
coefficients
Equivalence
interest
.debt .and
effect
add
government
zero.
the
coefficient
Ricard.ian
and-nominal
in which
that
privately-held The
hand,
bonds
sector
predicts
for policy
and
th_
the
(3c),
and
the,policy variables, growth
results
rate
(4)
variables
in
of
which use
the. interest of
the
the
joint the
estimation
5
lags rate,
production
forecasting each
of
the
exchange
index.
logs
3O
The
last
positive as
the
orthogonal
to
The
This
government
spending
interest
are
of
real
interest
in
government
two
spending and
spending
nominal
balanced
interest
budget
by is
is rate
increases
with
a
privately-
government
associated
ways
inflation
(-0.40)
and
inflation in which
and
is an
The
to
increases
in in
in
nominal
is via
an
increase
in
the
other
is via
an
increase
in
the
and
between
monetized that
channel.
effects
increase
one
indicate
changes
the
correlation
unlikely
output
which
the
spending
seems
the
in
occur:
rate.
from
of
an
debt
increase
The
rates
of
innovations is
negative
in
expected
alternative
government
in real
the
channel,
spending
interest,
purchase might
be
exploring.
The effect nominal
second of a
to
the
interest
debt
with
column
substitution
rates.
is consistent
inconsistent
last
surprise
privately-held
finding is
are
rates.could
rate
in
that
financed
debt
to
of
rates.
There
worth
in
related
means
effect
government
monetized
innovation
the
spending
in
in
positively
movements.
II shows
ingovernment
innovations
significantly
interest
Table
innovation
debt.
arise
in
innovation
taxes,
held
column
with
in Table of
The
coefficient
is
significantly
the
Ricardian
"crowding equivalence.
II shows
debt on
for the
taxes
on
innovation
positive. out"
the
This
effect.
It
Again,
the
31
positive
effect
inflation
channel
The effect an
open
a fall
in taxes
by
traditional
the
likelihood cross
rate
occur
by
debt
coefficient
theory,
via
an
shows
the
channel.
of monetized
financed The
ratio
equation
P ,the
significant,
tests
debt issue
matched
by
is negative,
but
it is not
an
indicate
constraints
first-order ARIMA
as
statis-
that
cannot
be
autocorrelation check
of
the
the
validity rejected.
residuals
serial
correlation
Since
the
policy
variables
may
II was
repeated
the
growth
i.e.,
rates,
similar
reported
to
of
the
estimation first
those
in Table
differences obtained
of
left.
logs.
in Table
is
indicates
is no significant
logs
7
coefficient
there
stationary,
I
be
The and
nonusing
results are
not
variable
is
separately.
Further
Tests
Following specified proposition school. 7 in
log
could
significant.
Although
are
debt
interest
on the
purchase.
The
that
real
market
predicted
of
of a
coefficient
of
tically
of privately-held
in
The
(1986),
real
terms
subscribed The
Rppsndix
Huang
to
dependent
results B.
of
the to by
variable the
likelihood
dependent
test
for
the
the
rational
is
specified ratio
tests
neutrality expectations as are
the
ex-
found
32
post
real.
( it
the
-
rate
of
inflation
inflation
calculated
rate_
rate
on
proposition
a
none
should
movements
in ex-post
finding
of
the
other
The
sign
The 360-day
for
with
IV.
None
are
statistically
the
"crowding ARIMA
check
significant
Table
that
Bill
that
are
some
hypothesized
Table
II
policy
effect
on
residuals
decisions the
effect.
debt
is
the
These
are
policy
is a short-lived
However,
the the
the
rate
to
discernible
results
indicates
is
theory',
using
The•results of
of
significant.
91-day
result
earlier None
re-estimated the
the
significantly•
monetized
of
as
innovations
financing
out"
out"
maturity.
correlation.
Only
strengthens
instead
effect
rate
by traditional
were
significant,
the
index
in the
are
on
of the coefficients
out"
)
neutrality
statistically
"crowding
longer
serial
the
III,
"crowding
rate
the
of
CPI
real
debt
coefficient
in
Treasury whether
Table
the
equations
If
e×-post
It also
variables
with
ascertain
in
effects.
of
bills
shown
indicates
policy
monthly
innovations
91-day
a significant
inconsistent
the
government
non-neutral
the
ratet-t
rates.
the
are
This
inflation
using
-
basis.
of
real
privately-held
have
( it-1
a statistically-significant
using
variable
positive.
An
have
results
dependent
-
year-to-year
holds,
The
)
i.e.,
is measured
variables
in
interest,
shown
in
Variables imply
that
• phenomenon. absence appropriate-
of
33
hess:of test
the
model
statistic
The
the
using
variable,
significant
the
are
coefficients
may
developing
are
which
significant
"crowding
each
Vl,
the
and
llI.
out"
the of
are
There
is no
The
expenditures on
theory,
is
misspecification forecasting bias
the
toward include
results,
the
The
that
rate,
misspecification.
of
the
the then The
rate
as
monetary omitting
VI,
i.n Table
in Tables
II
"crowding
in _ government
of
the
wrong
sign
Equivalence be due
to a
equations,
if
the
this
tend
equations
wil}
policy used
an explanatory authorities
positive
lags
could
r.h.s,
this
a
10
Ricardian
misspecified,
forecasting
exchange
and
forecasting
are
those
innovations
s.hown in Table
the
of
significant
and
time
finding
as shown
from
insignificant theory
coefficients
it is true exchange
likewise
in
of
equationwith
statistically on
feature,s
longer-termbonds.
is used,
different
coefficient
equations
zero.
forecasting
very
of
for
no
result,
rate
the
",_f
"and
This
high
effect
variables
traditional These
a
the
Again.,,_none
significant
ob_c,Jre
out"
policy
V.
structura_
as
could
results
effect.
based
ratio
rate.'@s
exists.
certain
such
.real
Table
effect
to
alternative
the
in
out"
be due
preference,,
of
likelihood
ex-post
statistically
countries,
When
360-day
shown
"crowding
however,
as the
is negative.
results
dependent
is questionable
variables here
do.
variable. tend
variable
coefficient
to
may on
to fix result
not If the in
monetized
34
debt
is
spurious
are
quickly
the
correlation
..and
test
•used
may
Summary
debt
Equivalence
net
"crowding
Philippines.
finance
Under
a
to which
hence,
The market the
that bonds
do
not
likelihood
that
the
model
of
the
as
the
bond do
part
add
may
rise
so
do
interest free
a direct The
hand,
implies
implies
future
net
As
be measured
as
is
issuance
are
authorities.
to
effect
wealth.
rates
effect
other
Ricardian
the
of net
of
country,
out"
and
interest
issuance
not
the
views
rises,
rates
validity
a developing
public
of the on
versus
"crowding
out"
interest
the
of by
result Ricardian that
the
taxation
wealth.
Financing
matter.
assumption efficiency,
empirical
effect
case
where
"crowding
Theorem,
realizes
decisions
spending
The
determine
therefore
financing•decisions
Equivalence
and
out"
deficit
regime
the
public
money yet
government
indicating
to
that
the
the
the
in
inflation,
(0.005).
traditional
consumption
degree
small
the
notion
ceilings,
of
in
The
the
wealth,
rates.,
of in
is negative,
Theorem
to
quite
is anattempt
traditional
of
expectations
innovations
is
innovations
Conclusions
study
on
that
inappropriate.
and
bonds
to
statistic
premised
implies
between
be
This
the
it
translated
monetized
ratio
the
since
tests.
of
rationality
in the The
treasury
forecasting
of bill
expectations, market
equations
is used and
or in
interest
3B
rate
equation
are
estimated
jointly
with
cross-equation
constraints.
The
results
"crowding day of
out"
effect
Treasury
Bill
whether
real
to
changes
rather
than
There
is
an
in
support
for
mitigates
the
validity
the
equation
cannot
be
rejected.
While
a
of
dependent
the
effect
out" of
certain One
preference.
on
such
There
tends
borrowing
on
a
confirming
the
presence
respect
to
long-term
the
of
noise.
high
very
basis. "crowding
specification
of
as
the
a discernible may
be
in developing rate
little The
first
"crowding
security
is
it is
the rate
of
present
be
exists,
8ill
the
The
constraints
Using
absence
debt
effect.
features
to
that
effect
long-term
feature
inflation.
significant
the
a
structural
of
white
Treasury
However,
effect
rate
phenomenon.
no statistically
is found.
economies,
with
out"
360-day
variable,
"crowding
"crowding
this
substitution
'rationality' are
raise
that
proposition
residuals
short-lived
difference
because
The
a significant
apparently
out"
cross
of
out"
or
also
indications
"crowding
91-
nominal
spending
expected
the
regardlese in
rates
the
monetization of
are
inter-temporal the
significant of
specified
there
in
a
variable,
government
and
increase
no
is
is
difference
dependent
in
rates
there
first
rate
Innovations
is due
the
is the
interest
interest
that
when
rate
the
terms.
nominal
indicate
lending
earlier
out"
are
the
policy
not
of
time or
results invariant
forecasting
3B
equations,
although
forecasting
In
equations
out"
countries
not
Seem
the
public
to
arise as
not
present.in,
a manner
in
continuously
over.
normally or
Nevertheless,
further
at
how
in the
countries.
case
because
spending The
postponement
discovering
such the
it disregards
financing
liabilities
of certain
countries also
of
out"
associated
research
effect
on
the
cannot
be
in. fact
create features
act
budget
the
efforts
the. Philippines
of
government
with
issuance
part
capital
the
of
does
as fragmented
issuing
sees
.absence
short-lived
structural
its by
public
government
a
can
the
developing
constraints
government
the.
countries,
irrationality
The
because
which
rolling
of
unlike
forsome
"crowding
cross-equation
but
alternative
that
apparently
the
cases.
the
developed
irrelevant
is
because
only
etc.,
because
indicate
for
it
developing
.markets,
wealth
results
is not
the
in most
wealth
the
effect
be
inappropriate
Furthermore,
rejected
as
may
studies
although
phenomenon.
tax
the
of numerous
"crowding
keeps
are
general,
findings
net
this
may
.constraint,
bonds
absence
which
of
debt
issue
day
of
should of.bonds and
in
other
it
expected as
well
reckoning. be
directed
addsto
net
developing
37 EXHIBIT
Measurement
of
In this deficit is basis. The the following
the
'.;
Deficit
study, the Treasury and IMF definition used. The data are quoted on a cash components of revenues and expenditures page.
CONSOLIDATED
1.
Budget
I
CASH OPERATIONS OF THE NATIONAL (Treasury and IMF Definition)
Revenues Revenues BIR Collections Customs C;o-I l ecl:.i ons C.ollecbions of Other Offices Non-Tax Revenues • Ecor_omic '3upport Fund Oper.'._ting and Miscellaneous Income (Fees and ,':;1:her- Charges) Interest on Deposits T_r_terest.on Advances t.o GovernmeF,.r.. Forelgn Grar_t,$ and Con1.,-"lbutions ,'"] nc 1udes base rent..:_.l s) Other Non-Tax Revenues
of the budget disbursement are shown .on
GOVERNMENT
Budgetary Tax
C.orporations
Expenditures Current
Operating Expenses Personnel Services .- includes wages and transfer oaym,(ents Naint.enance and Other Operating Expenses Allot.merit to L..oca; Government Units Debt Service: IntereSt Payments Subs i di es Transferred Liabil ities from PNB a.nd DBP Capital Out.1 ays I nf rast r..uct u re Equity Investment Outlay/Capitalization (includes GFIs and government corporations) Loans Outlay/Net Lending (includes GFIs and government corporations) Other Capital Ou5lays
Note that interest investments government outlays.
the debt service under expenditures payments and not amort, i]z a t and lending to both government financial institutions are included i
O
r]
S
,
includes and that. corporations under
only equ i ty _nd capital
38
FINANCING
N-CREATE
1981.01 1981 02 198! 03 1981 04 1981 05 1981 06 1981 07 1981 08 1981 09 198! 10 1981 11, 1981 12 1982 01 1982 02 1982 03 !982.04 1982 05 !982 06 1982 07 1982 08 1982 09 i982 !0 1982 11 19.82 12 198"'o 01 198:3 02 1983 03 1983 04 1983 05 1983 06 1983 07 1983 08 lq..oo °" Oq_ 1983 10 1983 11 1983 12
--0 08295 -0 32356 -1 88773 -0 20910 -0 72220 -0 13108 -0 23962 0 23250 -0 16566 -0 10573 -0 40398 1 644d5 -0 10900 0.92389 -1,47843 -0.07429 -0.49945 0.40406 -~0.133!5 -.0 48995. 2 40370 -3 36958 1 03502 -_5_ 74920 -3 24743 -1 78276 4 83871 -0.71424 -0.95130 35.80952 0.67391 -26 , 64730 6.65882 -5,69768 -0.311 "_'_ _,L,,
AVE-NC
-0.64510
-0.13559
0.067928
-0.02498
-4.60103
i . 747661
TABLE I-A THE BUDGET
OPEN-NKT.
0 09907 0 53125 -o'_ 66158 -0 00864 0 22828 cq 45587 0 33897 0 37455 0 55158 -0 04232 -0 00021 4 59697 -5.36091 4,50021 88/45311 0 07898 0 02688 -0 13156 0 28290 0 71846 1 4622[7 3 14240 -0 76629 17 5535,2 3 07516 2 85875 -6 33870 1 21316 -0 14012 43 58095 -1 86272 9 555.91 -29 32350 0 37217 -0 11319 _
DEFICIT
AVE-ONB
FOREIGN
-0.56232 ,
0.244512
17.53965
0.967,a47
-
0.133649
-4 . 27'¢26
2 0 0 0 0 0 6 -0 3 7 0 -0
AVE-FB
0 0 0 0 0 0 0 0 0 0 " 0 0 0 0 0 0 0 0 0 0 0 0 c) 0 57746 12179 09661 61290 12347 05819 0.202593 76190 18962 27956 35294 73043 08951 0 . 904937 .
0
0
0
0
39
M-CREATE
AVE-MC
1984.01 1.20405 1984.02 -0.74671 1984.03 -0.75881 1984.04 0.34286 1984.05 -6.67421 1984.06 8.45977 0.304490 1984.07 -1.78935 1984.08 0.44920 1984 09 0.11270 1984 10 -040170 1984 11 1 14268 1984 12 -0 36710 -0,14226 1985 01 0 92676 1985 02 -0 86463 1985 03 -2 23222 1985 04 -4 10588 1985 05 -0 66379 1985 06 -0 37217 -1.21865 1985 07 -41 58570 1985 08 -0 19256 1985 09 0 31540 1985 10 -0 36512 1985 11 0.19787 1985 12 -0 21559 -6.97428 1986 01 0 24•621 1986 02 0 15870 1_86 03 -0 21842 1986 04 0 13574 1986 05 -0 10958 1986.06 -270.38500 -45.0287 1986 07 1.80794 1986 08 -0,11473 1986 09 -0,88954 1986 10 0.16621 1986 11 -0.31543 1986 12 -0,12754 0,087818
OPEN-MKT.
AVE-OMB
0 11185 0 05808 -0 31096 -4 99789 4 53342 "2 91532 -0.72653 -0 43540 5 03424 2 05147 1.96292 18 74066 1 26090 5.810035 22 35399 0 60703 -7 94666 123 13820 6 98595 4 48736 25.45437 -220.51400 0.80726 -1.34278 0.25286 -1.23037 • -0.01110 -0.30482 0.46415 3 19519 3 32022 -3 97357 1 92828 • -298 25700 -58.7573 0 58430 -0 38831 3 70694 -0 38339 0 18334 0,00347 0,624408
FOREIGN
.......
0.48636 -0.00061 -0.00307 0.15966 -0.11842 1.37931 -0.02902 -0.00796 -0.07506 0.14663 0.08804 -0.01509 0.08232 0.00276 -0.23611 0.92647 0.15823 -0.00353 14.42857 0.14412 0.02799 -0.08869 -0.09857 0.00048 _,0.03390 0.09356 -0.05778 0.04047 -0.15621 5.28571 -0,03174 0,00482 -0,00285 0,00525 0,00000 0,00088
AVE-FB
•0.283374
0.027312
0.169562
-0.00293 •
1.041149
0,00162
40
Figure
_==.,._ _
I-A. 1
"
41
Figure
I-A.2
L.C_T __N_NCED B_ wEHHIlL _OHROHIHG (1981d_6, H_n[h!9)
, i
,
A
-_e i
!
m
-a_! -4_I i9_I r_
!982
1983
i984
1985
!986
43
OF
PERIOD
PRIVATE
1981.01 1981J02 1981 03 198"1 04 1981 05 1981 06 1981 07 198"1 08 1981 09 1981 10 1981 11 1981 12 1982 01 1982 02 1982 03 1982 04 1982 05 1982 06 1982 07 1982 08 1982,09 1982 10 1982 11 1982 12 1983 01 1983 02 1983 03 1983 04 1983 05 1983.06 1983.07 19"83.08 1983.09 1983.10 1983.11 1983.12
16981 17106" 17627 17672 17248 171"09 17654 18241 18271 18350 18246 18284 18244 21944 21023 19746 18701 19042 19273 19758 2"1273 20778 22240 21348 24136 25112 25704 24808 25792 26018 25287 25250 26403 25530 23995 23085
TABLE I-B PRIVATE HOLDINGS OUTSTANDING GOV'T SECURITIES (In Million Pesos)
AVE-PRIV
PERIOD
1984 01 1984 02 1984 03 1984 04 1984 05 1984 06 1984 07 1984.08 1984,09 1984.10 1984.11 1984.12 1985.01 1985.02 1985.03 1985,04 1985.05 1985.06 1985.07 1985..08 19_5.09 1985,10 1985,11 1985,12 1986,01 1986.02 1986,03 1986,04 1986.05 1986 06 1986 07 1986 08 1986 09 1986 10 1986 11 1986 12
17290.50
18174.33
19783,33
20778;'33
25261.67
24925.00 W ..............
SOURCE:
Central
Bank
Statistical
Bulletin
PRIVATE
23089 23837 26484 27731 25385 25230 24572 27668 31715 33841 35559 39910 39143 41485 43292 50358 57262 6"2440 63671 64304 65433 64867 63224 62701 64481 71072 81664 87021 88677 88954 89566 92938 90336 90803 94521
AVE-PRIV
25292.67
32210.83
48996.67
64033.33
80311.50
91632,80
44
__
_-
_ .'_/
,_
i
i
?e___ee_, i
/ ,__
|
_=_,_-_.,.._,_
_=
__
_._._-_-_.
l
_._
_, ,_
'__
_i
_%%_%_
•
_1_
_
_
i__l_, _,_
_
_
_
_l
n _
_rll_
_l_
_:l:_
_
":ll_
_l:_
_1_
_
_l_ ,_ll_ 1_"_'_
_llll_
_1_
._l_,
_1_
Pll_
_
_i_
_
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•
l
_
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I
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l
_
l
* '_ _v.
_
II
_l_l
1
_
_,,,_iII_'_
_
_
_
_
_
_
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1
_
_l
H
i
ll
ll
l
_
l'_l_ _
_..
n .....
l_
_
l --
1
Ill
47
25_
150_..
5_
• FisueeI!-C B[II_GET' DEFICIT', Quarterls, 1979-1981 (InNillion Pesos)
48
Fiq"_": _'!=_
.-
I']I "_II
III _1
•
I
_ _._
_
i
-
_-
.....
"
'
_i;
12gO_ 1 75_ . !l\iN./\f_%/tT\i_t i
i<
,=
i
it_ t t
_D::.F!CI!
ft
I-_ ljq i\M %7
-:-
•
? _=_
F! I,, s°
l
Ii
t
r'i _|
-z-_
'_
.... _
'
i _m
|
__
oo.,o
:_
.,-_
,_. i\ !
'°°J
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•
_
" " IT '
i
'
!
......
_ '. '
:
'
_ '
'
_ !
, .;.
. _
-
.....
i "'__'째'- "_-"_'.-' -_%:
< h. _>'- :-2-
ii__r_ e._,_,8i=i_6 .,ir_!4,_
"
째 |
3_;J !|
.!,
'-_i
,./\!'-'_,_.\ i " _.
_s-7:
i._
I,_._4 I._5
I._!I_
52
rT_ _- DIFFE._EHCE_ OFTHERi_hOOFDEFiCi_ Fi_iz,e !!I=B _TOIN;ERECT ___o_._T P_YMENT_
10 i3 !
t |
. i
I
.:
i__._
!9_
i9_
53 TABLE Results of the Joint Estimation the Interest Rate Equation:
Dependent
Variable
Forecasting include:
of
II the Forecasting Equations January 1981-December 1986
First Differences of 91-Day Treasury Bill
the Nominal Rate
5 Lags each of the logs of monetized debt, government expenditures, privately-held debt, nominal exchange rate, growth rate of the index of industrial production, and 91-day Treasury Bill rate
Equations
Constant
p
_QAov.a#j.ons in the Log of Log of Monetized PrivatelyDebt Held Debt
Log of Government Expenditures
t1.184
0.92
-1.173
18.432
0.65
(8.853)
(0.129)
(1.941)
(6.370)
(0.281)
NOTE:
In
this
and
in succeeding
Tables,
the
asymptotic
,
standard
errors
significance significance autocorrelation
and
are at
at
in
the
parenthesis,
the
5%
I% level,
coefficient.
indicates
level, p
indicates is the
first-order
4
.
TABLE
Results
of the theInterest
Dependent
Forecasting
Joint Estimation Rate Equation:
Variable
See
p
0,895
(9.660)
NOTE:
(0.204)
.See Note
in Table
Table
Inoovation Log of Monetized Debt
'
9.621
the Forecasting Equations January 1981-December 1986
First Differences of the _eal Rate of Interest using 91-Day Treasury Bill Rate
Equations
Constant
of
III
II.
and
the
I!
in the Log.of PrivatelyHeld Debt
Log of Government Expenditures
0.519
34.411
,0.526
(2.407)
(12,!13)
(0,378)
55 TABLE
Result the
_f ,the Joint Estimation In,re rest R_te Eq,_at!on:
Dependent
Forecasting
Variable
the. Forecasting ,Equations January 1981-December 1986
First Differences 360-Day Tre_ury
Equatipns
Constant
of
IV
See
p
Innovatio_in the Log of Log of ,Monetized PrivatelyDebt Held Debt
Log of Government Expenditures
0.180
0.463
1,066
5.997
(6,277)
(0.761)
(5.210)
(12.324)
See
Note
in Table
II.
of,tjhe Nominal 8i l Rate
Table â&#x20AC;˘ II
2.5!1
NOTE:
and
|
(0,362)
56 TABLE
Result the
Dependent
of the Joint Estimation Interest Rate Equation"
Variable
Forecasting
P
2.339
the Forecasting Equation8 January 1981-December 1986
First Differences of Real Rate of Interest 360-Day Treasury Bill
Equations
Constant
of
V
See
Table
Log of Monetized Debt
the Using Rate
and
the
II
I n novatj_qn_i n the Log of . Log of PrivatelyG_vernment Held Debt Expenditures
0.392
-0.540
1,669
0,172
(0,694)
(4,987)
(15,316)
(0.311)
i
(5,413)"
NOTE,: See despite
Note in Table I[, the use of a tuning
The option
estimates in the
did not converge computer procedure,
57
TABLE
Result of the Joint Estimation the Interest Rate Equation"
Dependent
Forecasting
.Variable
of the Forecasting Equations January 1981-December 1986
First Differences of -91-day Treasury Bill
Equations
,Constant
VI
10 lags monetized debt, and
of
the debt, government
the Nominal Rate
growth rate privately-held expenditures
Innovation in the Log of Log of Log of Monetized PrivatelyGovernment Debt Held Debt Expenditures
p
-0.060
-0.020
31.866
2.853
-6.270
(1.145)
(0.443)
(13.602)
(2.912)
(4.629)
.NOTE-
See
Note
and
in
Table
If.
of
91
DAY TREASURY BILL RATE I1981.01 TO 198;6.12
50
_ •
4O
3O I-'. Oq
20
_p
IL
<! 10
0
-10
--20 1981.01
1981.12 [3
TB-91
1982.12
1983.12 +
1984.12
PERIOD TB-91 (let D_ff)
1985.12
1986.12
360-DAY. TREASURY BILL RATE. 1981.91 TO 1986.12 50
,.
40l;
I_ • OQ
20-
M
<! =
10
-10 -
o..... ..... ........... 1
-20
Illl
1981.01
III
iitllt"l
1081.12
11111111
11 I i I i i ill
1982.12
iliill
1983.12
I." IIIii
I1111
1984.12
Ililllil
Iiil'l
1985,12
ill
iiii
19t.12
60
â&#x20AC;˘References Aschauer, David Alan. American Economic Barro,
Robert Journal of
Public Banking
The 323.
J. "Are Political
Debt 12,
Review
"Fiscal Review,
"Federal Shocks," no. 4,
of
Policy and Aggregate Demand." 75, March 1985, 117-128.
Government Economy, 82,
Bonds 1974,
Net Wealth?" 1095-1117.
Deficit Policy and Journal of Money, 1980, 747-762.
"Fiscal Policy Economics and
the Effects Credit,
and Consumer Statistics, May
"The Impact of Social Security Saving-Evidence from the U.S. Time Series. Enterprise Institute, 1978.
of and
Behavior." 1979, 317-
on
A. "Macroeconomic Implications Budget - Some Basic Considerations." Economics 1985, 95-112.
Private American
Calvo,
Guillermo Government of Monetary
Cho,
Yoon Je. "Inefficiencies from Financial in the Absence of Well-Functioning Journal of Money, Credit an_ Banking, 191-199.
Liberalization Equity Markets." 18 No. 2, 1986,
COX,
Michael Debt?" 25-31
Financing September
Djajic,
Slobodan. Economies: Substitution." 1986.
Evans,
Paul. Rates?" 300.
W. FRB
"What Oallas
is the Economic
"Effects of The Role of Unpublished
"Do Budget Deficits Journal of Monetary
Feldstein, Martin. Demand. " Journal
"Government of Monetary
Rule for Review,
Budgetary Policies Intertemporal paper, Columbia Raise Economics,
Deficits Economics,
of the Journal
Public 1984,
in Open Consumption University,
Nominal Interest 20, 1987, 281-
and 1982.
Aggregate
Huang,
Roger D. "Does Monetization of Federal Debt Matter? Evidence from the Financial Markets." Journal of Money Credit, and Banking 18, no. 3, 1986, 275-289.
Kochin,
Levis A. "Are future Taxes Anticipated A Comment." Jout'nal of Money Credit, 1974, 385-394.
by Consumers? and Banking 6,
61
Kormendi, Roger, "Government Private Sector Behavior." December 1983, 994-1010.
Debt, Government Spending, American Economz_Review
McKinnon, Ronald I. and Donal J. Mathieson. "How to Repressed Economy." Essays in International Princeton University, No. 145, December 1981. Mishkin, Frederic S. A Rational Hacroeconometrics: Testing Efficient Harkets Models. Munne]l, Alicia. The Effect of Saving. Cambridge, Mass.: Plosser, Charles I. Asset Returns." 326-352. Remolona, Eli Philippines," Seater,
Expectations Approach Policy Ineffectiveness Chicago, NBER, 1983. Social Security on Bal]inger, 1974.
"Government Journal of
Financing Honetary
a
to and
Personal
Decisions Economies
J_hn J. and Roberto S. Mariano. "New Tests of Life Cycle and Tax Discounting Hypotheses." Journal Monetary Economies 15, March 1985, 195-215.
the of
Ernest. "Empirical Evidence on the Balance Effect in Canada."3ournal and Banking, November 1970, 473-485.
"An Empirical A Comment." Journal May 1979, 214-218.
Review 323.
the Budget Deficit Paper No. B5-02.
and 1982,
the
J. Real Credit,
"Financing PZDS Working
Manage Finance,
in
Tanner,
H.
and 73,
of
Investigation of of Honey Credit,
"Fiscal Policy Economics and
and consumer Statistics, 2,
Tax and
Short of
Run Money
Discounting: Banking, 11,
Behavior." May 1979,
Vandaele, Walter. Applied Time Series and_Box-Jenkins Models. New York: Academic Press, Inc., 1983.
The 317-
APPENDIX A.I RATIOOFINT_RE_ T _A_N.TS TOTH E qEFIC_T
Year and Quarter
_
class boundaries,fEeq_ency :(f i) cum.fr_. (Fi) tal]y; ,_: -2.551to -1,027 -I.027 too.soT
3 7
1.041:to 3,575 3,575to5.109 5,109to8,643
6 5 3.
.........................
.2.i ,JIdlll'. 29 ///// .3.2 ///
32
!979,1 1979.2 1979,3 1979,4 1990,1 19_0,2
0,1715 -1,551 -0,544 -2,337 1,746 -2,551
1980.4 1981,1 !981.2 19_1,3 !981,4 !992,1 !982,2 !982,3 1982,4 1983.1 1983.2 19_3,3 1983,4 1984,1 !984.2 1954,3 1984,4 1985.1 1985.2 1985,3 !985.4 1985,I 1986.2 1986.3 1986,4
.,_,638 3.7_7 3.940 5,418, _6,642 4.882 3,773 .5.227 2_328 "0,975 1,258 0,645 2,7t3 2,143 -0.148 0,32.1 i,581 0.290 0.397 0,779 2.396 1,595 -0,177 1.124 3,123
98o.3
3 /// 10 ///////:
2.I55
, ................................ sod, deviation ;, (n+ll/4 : 8,25
: ..................
_#-._... ......
2:,,te72385051 ,.... QI class : -!.027 to 0,507
[(n+t)/i],+-,F ,-:_1 QI: ! + c = .................... : -I,027 + Ill534l[(8.'25--3)/7] Q1 _f, Q1 ,, i : Q1 : 0,1235
3t[(n+l)/4] : 24,7
Q3class: 3,575Eo
3,[(n+1)/4t _,F :, Q3 Q3= 1 + c t ...................... Q3 f : Q3,, Q3
:
, to 5,109
: 3,575+ 1,534[(2475-24)/_I
3,8051
Interquartile Range: Q3- Ol : 3,6816
pseudo-std,devn,=2.7271111111 differencebet. hist. std,devn,andpseudo-std.devn, = 0.559872 outlying valuesof 6 : lowerbound: -5,3989 upperbound: 9.3275 ave, valueof _: â&#x20AC;˘1.7403619609
r1++mP :. +I MONTHLY, danuar_ _9_!j!-_,D_b_ :;t.9_I_: CLASSBOUNDARIES
FREQUENCY (fi)
TALLY
CUM,FREQ.(Fi)
=.;.................................................................
-4,88o9to-2,384858o 25 -2.3848580 _;o 0.1116165
14
\\\iX_\\\\\\\\ ?.
0. 1118185:: Io,.,'!._0;78910
:29
[!\;\\\ \ \ \\ \\\ \ \\\ \\ \\\\ _\_.\t_\:
17 .[_, ,, o
..: _8
£
5.Io41655::_o _.:g(/p_Oo ...... • 7.6004400 )OIQ,0_671i0 I
'
:-:"
:9 :,:N,\_\\\\\\
68
'_I
69
X:
'
'
n ; no, of_.:obscr, watjons 72 k no. of (;:las_es,:;l,
. ..ra_e.:; k_ghest, value-,_<.., J._we_,a_:a_lue ,,,., •__:.i-. ;,",-............. -"-'-" " """ ..% _!,.,,. • , ,
Q C]BSS.:., •:0 1,I,!_165 .... _q 2.607891 1
Q _]a_s::_,:_9I"_o.-:5,Io4_855 .3 F
1'_
......
: .}
I
3 ...............
ave. v, lue:;o]f.:i, :,..d,_
_!34259... f:
histor]cai..:s;O.::O_yidtion ofd:
!!.!99944 (_
_seudo-s_d. devn.. out]yin9 values ofd: lowerbound : u_perbound:
3.001015
-5,8412428 I0.5_4241
64
RATIO OF BUDGET DEFICIT TO INTEREST PAYMENTS Monthly, 1981 - 1986
Period
1981 01 1981 02 1981 03 1981 04 1981 05 1981 06 1981 07 1981 08 1981 09 1981 10 1981 11 1981 12 1982 01 1982.:02 1982 03 1982 04 1982 05 1982 06 1982 07 1982 08 1982 09 1982 10 1982 11 1982 12 1983 01 1983 02 1983 03 1983 04 1983 05 1983 06 1983 07 1983 08 1983 09 1983 10 1983 11 1983 12
._
-4 880932 12 592990 2 323458 -0 216155 11 480660 3 826011 6 662032 7 1.90821 3 839429 7 203055 5 578358 6 002564 0 905904 5 126977 8 814388 0 038844 11 080910 4 086339 4.265373 5.527750 6.037118 1,145547 2.408244 2 937626 0 184416 1 862687 0 992228 0 306931 3 577670 1 793956 0.060172 1.455189 0.258333 0.042714 0.977337 5,010974
Period
1984 01 1984 02 1984 03 1984 04 1984 05 1984 06 1984 07 1984 08 1984 09 1984 10 1984.11 1984.12 1985.01 1985.02 1985.'03 1985".04 1985.05 1985.06 1985.07 1985.'08 1985.09 1985,10 1985,.11 1985 12 1986 01 1986 02 1986 03 1986 04 1986 05 1986 06 1986 07 1986 08 1986 09 1986 10 1986 11 1986 12
: " _
-3 440130 3 911058 3 787376 -0 246377 -0 798316 0 268519 -2 861563 0 700893 1 888350 1' 001708 0 989583 2 265650 -0 637838 2 130137 -0 325792 0.024790 0.577064 0 878412 -0 006375 3 23'4823 -0 784146 -0 989183 1 269448 6 237664 3 417486 2 268169 0 903810 -0 915778 0 646519 0 00541.8 0 548356 2 022746 0 755747 2 748046 2 328745 3 761747
65 APP_DIX
SMPL 1979.2 31 Observations IDENT DRAT
1986.4
Autbcor-re lations '
Partial
*** *:*
|.
A.III
Autocorre *** **:_':
***
*: * *
**
*:*
** ** ' *
*
** **
**
**
,** I ' *: **", *:I **:I I* I '
* * ** ** * I.
I
, f ' ,' f: S.E.
lations
*
* * **
of
Correlations
.1796053
Q-Star.
ac 1 2 3 4 5 6 7 8 9 I0 ii 12 13 14 15 16 17 18 19 20 '7 _I 22 23 24
-0.2583 -0. 2398 0. 2697 0. 0464 -0. 0483 -0.1669 -0.02!4 0, 1703 -0.2084 -0. 0411 -0.0089 -0. 0591 O. 2210 -O. 1488 -0.1477 O. 1768 -0.0185 -0. 1990 0.0920 0.0466 0.O392 -0. 1034 0.0075 0.1558
(24
lags)
pac -0 2583 -0. 3284 O. 1232 '0.1113 0. 1252 -0.1914 -0.2030 0, 0173 -0.1131 -0.,0050 -0.1759 -0. 1585 0. 1976 O 0380 -0 1466 -0 1696 -0 1127 -0 2124 0 0505 -0 0211 0 0051 -0 0668 -0 0751 0 0013 16.O7851
88
SMPL 197.9.4 - 1986.4 29 Observations LS // Dependent Variable Convergence achieved after VARIABLE" " C "--" AR(1) AR(2)
is DRAT 2 iterations
COEFFICIENT
' ".... "-
:STD".
0;0969968
.. -0 3767495 -013646029
R,sqUared Adjusted RLsquared S.E._.of regression Durbin_Watson--stat
.0.190853 0.128718 1.719054 1,862002
ERROR
T2STAT.'2
01.i839424
0.5273217
0.1850491 0.1866992
-2.0359437 .--1,9528893
" ....
Mean of dependent vat S,D. of dependent vat Sum of squared resid _ Log likelihood
0.802 0, O52 0,062 0.161152 1.841663 76.83377 -55.27727
SMPL
1979.1
- 1986.4
3_ Observations
! ENT RATIO Autocorrelations
Parti_al Autocorrelations
_****** _**** _**** '_**
****** * ** ** •* ****
•* •** *** **** •*** •_ • ** •, •, •,
, ' |.
* * * * *** **
•_
* •
•
*
• •
• * *
_ 1 2 3 4 5 6 7 8 9 I0 ii 12 13 14 15 16 17 18 19 20 21 22 23 24
ac
pac
0.6209 0.4471 0.4375 0.2261 0.0002 -0.2296 -0.2774 -0.2680 -0.4340 -0.4118 -0.3343 -0.2552 -0.1592 -0.2154 -0..1503 -0.0105 -0.0299 -0.0643 0.0486 0.1065 0.1023 0.0487 0.0859 0.1315
0 6209 0 1002 0 2064 -0 2243 -0 2364 -0 3809 0 0062 0 0843 -0 0902 -0 0246 -0 1015 0 0272 0 0550 -0 2659 -0 1841 0.0026 0.0329 -0.0702 0..1051 -0.0771 -0.0282 -0.1295 -O.0837 -0.0766
J
S.E.
of
Correlations
.1767767
Q-Star.
(24.1ags)
_ 55.24816
68 APPENDIX A.IV
SMPL 1981.02 - 1988, 12 71 Observations IDENT DRAT .....................
Autocorrelations
Rartial
.....................
***** * ' **:_: **
"_ * '_ ;_:_ :_:_: I,: ,.... * _: *
**_:* _#:_:* * ** ***.
:
* * *: _:
_': *
_:*
** "_:'_: *
** ,!,: S.E,
of Correlations
1186782
..................
ac
__
pac
1 -0, 53 !0 -0.53 I0 2 "-0,0747 "0, 4967 3 O, 3325 O. O173 4 -'0,2259 O, 0158 5 0,0044 -0.0085 6 O, 1037 -0 0230 7 .-0,0_0i 0 0886 8 -.-0, 1268 -0 1038 9 0. !108 -0 I003 I0 O, 1290 : 0 1985 ii -,0.357.6 -O 1573 12 0.331i ' .0 0550' 13 O. 0707 0 _01_2 14 -0. 1999 -0 0517 15 O. 2936 O. 0726 16 -0, 1163 . 0 0906 17 --0.O942 O 0210 18 0 0932 -0 0930 19 0 0687 0 0676 20 -0 2482 -0 2109 21 0 2093 O 0487 22 -0 0112 -0 0898 23 -0 1874 -.0 0238 24 0 2052 O 0161
*
"_: *
_
_ ?::. "._---i 1_ _ i- ::"_-_.'_.. T2. _" L[ .:_7_[:__[L-.:.,_ "L:". l "._"__2.".._. "T_"..L ,_,"-"
;_',*"_:*_ _:****
*
_- _--
A_2toeorre iations
Q-_Stat
(24
lags)
77,58967
SMPL. 1981.04 - 1986.12 69 Observations LS // Dependent Variable is DRAT Convergence achieved after 1 iterations VARIABLE
COEFFICIENT
C
-0.0211712
0.1178646
-0.1796224
0.858
-0.8998889 -O.5531131
0.0954558 0.0835280
-9.4272799 -6.6218855
O.000 0.000
iAR(1) AR(2)
R-squared Adjnsted R-squared S.,E. of regression Durhin-_atson stat
0.577323 0.564514 2.397597 2.030102
STDEREOR
T-STAT.
Mean of dependent vat S.D. of dependent vat Sum of squared resid Log likelihood
2-TAIL
SIG.
0.020845 3.633199 379.3992 -156.7114
SMPL 1981.01 - 1988 72 Observations IDENT RATIO Autocor-_'eiations
12
Partial
'_: ***: *._r._'.*:_. ;_: ** _*:_*::*: *'_: * *'** ** ..
Aut,ocor_-e iationa *: *;_:,* "**:*'-_P_: _
1 2 3 4 5 6 7 8 9 10 11 i2 13 14 15 1.6 17 18 19 20 21 22 23 24
;_: _: * *:,_: _:*:
*** *
_ * *
*** ._: * *
* **:
_.*: *
*
*:_: *: S_E, ...............
of
Correlations -- _
,.:._-_
,117851:[
:,:. :_. ..........................
Q,,-Sba.%,(24 __ %: ._ T_ __.._ .Z: _--:_ _--_ _
_
ao
pac
0 0784 0 2693 0 4932 0 1067 0 2340 0 28i9 0 1757 0 1242 0 2883 O. 2464 --0.02,-.3 O, 3449 0.0690 -,0.0304 O. 2664 --0.0444 -0.0470 0.0555 .... O. 0071 ,--0, 1780 O. 0975 -0.0"5째,.,,,-,.. .,-, -0.1809 O. 0663
O. 0764 O, 2650 O, 4954 0. 0803 0.0056 O, 0280 0. 105 ! -0. 0563 O. 0837 O. 1863 -0. 1718 O. 0968 -0.0827 -0.1266 O. 0232 -,0,0626 -0. 1307 -0.1430 O. 0301 -0. 1741 O. 1412 -0, 0269 0.0363 -0. 0144
lags)
:: ,___, .........
66,47027
71 Appendix Results
Table
I
of
:
the Likelihood Ratio the,Cross-Equation
Likelihood â&#x20AC;˘ ratio Marginal
Table
II
:
Likelihood Marginal
TestS, on the Constraints
=
level: 2 X (93)
=
level:
Table
III
:
Likelihood
ratio
sta%is,tic:
Table
IV
:
Likelihood
ratlo
statistic:
of
2.8292?528 0.010719
statistic:
significance
Validity
2 X (93)
statistic:
significance
ratio
B
0.752412528 0.010719
_ (93)
=
*
=
0.200342304
2
Marginal
Table
.NOTE:
V
:
Likelihood
significance
ratio
X
(93)
level
statistic:
0.010719 ,2 X (93)
=
*
Marginal significance level is the probability getting that value of the likelihood ratio statistic higher under the null hypothesis.
*
2 The
X
statistic
was
negative.
of or
72 APPENDIX C LISTOF VARIABLES,
VARIABLE
CB
REQREB
DESCRIPTION
PERIOD
Holdingsof OutstandingGov'tSecurities -- bythe CentralBank
1981m19aB million P (monthly)
CentralBank
Holdingsof Outstandin9 Gov'tSecurities 1981-1986 -- by the domesticsector (monthly) (Commercial Banks,SavingsandOtherBanks, TrustBanks, Semi-Gov't Entities, Private)
million P
Central Bank
FOR ,,.
Holdingsof Outstanding Gov'tSecurities -- by the foreign sector
1981-1986 (monthly)
million P
TREGS
Reserve-EligibleSecurities --Deposit HoneyBanks, Thrift Banks, Specialized lov't Banks
1981-1986 million P (monthly)
MC
MoneyCreation = CB- REQRES
1981-1986 (monthly)
PD
Publicly*heldDebt : (DOM+ FOR)- TREGS
GE
Government Expenditures
1981-1986 million P (monthly
Bureau ofthe Treasury
TB91n
91-day Treasury BillRates (nominal, end-of-month)
1981-1988 percent/ (monthly annum
Central Bank
TB360N
3BO-day Treasury BillRates (nominal, average) /*
1981-1986 percent/ (monthly annum
Central Bank
Exchange Rate (end-of-month)
1981-1986 (monthly
FarEastern Economic Review
IndexoftheValueofProduction
1981-1986 1985:I00 (monthly
Industry )rends (NEDA)
Consumer PriceIndex
1981-1986 1978=I00 (monthly
Central Bank
ER
PRODN
CPI
_
.1981-1986 (monthly)
CentralBank
million,P
DOM,
Required Reserves --DepositMoney Banks,Thrift Banks, SpecializedGov't Banks
SOURCE
UNIT
1981-1986 (monthly
Note: Alldataarefortheendofthemonth. /*Point-in-Lime dataforthe360-day T-Bill ratearenotavailable.
::
:
Cen_ra.l,Bank
Central Bank
generated
"
PIUS$
generated