Is rice price a major source of inflation in the Philippines? A panel data analysis

We estimate a panel vector auto-regression model using monthly prices for 17 regions in the Philippines from 2007 to 2019. Our results suggest that the effect of rice price on inflation is larger than the effect of fuel price and remittances. The results obtained are robust to various model specifications, different sub-periods, and inflation proxies. The impulse response functions for sub-samples of regions show two remarkable results. First, the response of inflation to a rice price shock varies according to poverty incidence by region. Second, the magnitude and persistence of this effect are larger for regions with high poverty rates. These results suggest that the Central Bank should keep alert in monitoring and assessing key developments in rice prices and supply.