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Philippine Business Cycle Characterization: A Christiano-Fitzgerald Band Pass Filter Reassessment

This study presents an assessment of Philippine business cycles through main features (duration, amplitude, and slope) and characterization (volatility, co-movement, and persistence) covering the period 2003–2017. The band pass filter by Christiano and Fitzgerald (2003) is used to decompose the trend cycle and is applied in addition to macroeconomic variables. The Harding and Pagan dating algorithm is additionally employed for robustness check. The period under investigation brought about six cycles: Q4 2002–Q3 2004, Q3 2004–Q4 2006, Q4 2006–Q2 2010, Q2 2010–Q1 2013, Q1 2013–Q1 2015, and Q1 2015–present. Findings from this study show that broad money supply and investment are the most volatile macroeconomic variables while private consumption exhibits the least level of volatility. Inflation also showed low volatility levels, which is attributed to the central bank’s inflation-targeting policy. In terms of co-movement, private consumption has the highest co-movement among the observed variables while broad money has the least level of co-movement. Empirical tests also showed that inflation has strong but negative co-movement with gross domestic product. The positive co-movement of government expenditure and broad money with real gross domestic product shows that these fiscal and monetary policy tools are procyclical. Finally, turning-point empirical analysis shows that expansion phases tend to move faster compared to contractions and that the Philippine economy is still in an upturn with output expected to exceed the current trend.