Modeling the Economic Growth of the Philippines with Structural Change: A Case of the COVID-19 Pandemic
Authors
Jacque Bon Isaac Aboy
Statistics Program, College of Science, University of the Philippines, Cebu
Nelia Ereno
Statistics Program, College of Science, University of the Philippines, Cebu
Ian Jay Serra
Statistics Program, College of Science, University of the Philippines, Cebu
Abstract
The structural change brought about by the COVID-19 pandemic in the behavior of economic growth in the Philippines is not yet fully analyzed and understood. This paper answers whether the pandemic caused a regime switch in the gross domestic product (GDP) of the Philippines, and if it is cointegrated with the Peso-Dollar exchange rate, import, and the Philippine stock market, in the presence of a structural break. The period used is from the 1st quarter of 2012 until the 1st quarter of 2022. An ARDL model is then proposed that describes a linear relationship between the variables. Results from the analyses show that the variables are cointegrated with a structural break in the first quarter of 2020 using the Gregory-Hansen test of cointegration with regime shifts. However, the structural change does not have a significant relationship with GDP based on the long-run coefficients in the proposed model. Findings suggest that policymakers should monitor and adapt economic policies for structural changes and utilize econometric models sensitive to events that significantly disrupt the dynamic behavior of the economy of the country.
Keywords
- structural change,
- ARDL model