Monetary Aggregates and Economic Activity

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Monetary management in the Philippines can more effectively support objectives through closer study and control of the growth rates of monetary aggregates. Specifically, there is a need to determine whether a monetary aggregate can serve as an intermediate target of monetary policy. Regression analysis indicates that the broader monetary aggregates M3, M3A and M4A can predict future economic activity more accurately and have better forecasting capability over narrowly defined monetary aggregates. Several alternatives are also given for Central Bank to exercise greater control over the monetary aggregates.