A Research Study on the Effect of Inflation on Human Development Index in the Philippines (2000-2023)
DOI:
https://doi.org/10.11594/ijmaber.07.09.03Keywords:
Economic Development, Generalized Least Squares (GLS), Human Development Index (HDI), Inflation, Ordinary Least Squares (OLS) regression, Philippines, Time-series analysisAbstract
Inflation is one of the most important macroeconomic indicators, as persistent changes in the general price level can affect economic conditions and household welfare. This study examines whether inflation affects the Human Development Index (HDI) in the Philippines from 2000 to 2023. A quantitative time-series research design was employed, using secondary data from the Philippine Statistics Authority (PSA) and the United Nations Development Programme (UNDP). The study uses a single-variable time-series framework to examine the temporal relationship between inflation and HDI within the Philippines while accounting for serial dependence in the data. Ordinary Least Squares (OLS) regression was used as the baseline model, followed by diagnostic tests and a Generalized Least Squares (GLS) model with an AR(1) error structure to correct for autocorrelation and improve the reliability of the estimates. The findings indicate that inflation has a negative but statistically insignificant effect on HDI (p = 0.2515), explaining only 5.93% of its variation. These findings suggest that inflation alone is insufficient to be considered the primary driver of human development in the Philippines, which is likely influenced by broader economic and structural factors such as access to education, healthcare, and social protection rather than short-term price movements. While maintaining price stability remains economically important, it should be complemented by sustained investments in human capital and social services to support long-term human development. Future research may incorporate additional variables and alternative econometric approaches to capture the multidimensional determinants of human development.
Downloads
References
Bangko Sentral ng Pilipinas. (2019). Annual report 2019: Monetary policy and infla-tion. https://www.bsp.gov.ph/Media_And_Research/Annual%20Report/annrep2019.pdf
Beach, C. M., & MacKinnon, J. G. (1978). A max-imum likelihood procedure for regres-sion with autocorrelated errors. Econo-metrica, 46(1), 51–58.
https://doi.org/10.2307/1913644
Box, G. E. P., & Jenkins, G. M. (1976). Time se-ries analysis: Forecasting and control (rev. ed.). Holden-Day.
Breusch, T. S., & Pagan, A. R. (1979). A simple test for heteroscedasticity and random coefficient variation. Econometrica, 47(5), 1287–1294. https://doi.org/10.2307/1911963
Chipunza, T., Ntsalaze, L., Kunaka, B. W., & Chikosha, T. (2026). Inflation, indebted-ness and human development: Panel evi-dence from Southern Africa. SAGE Open. https://doi.org/10.1177/21582440251413959
Cochrane, D., & Orcutt, G. H. (1949). Applica-tion of least squares regression to rela-tionships containing autocorrelated error terms. Journal of the American Statistical Association, 44(245), 32–61. https://doi.org/10.2307/2280349
Cook, R. D., & Weisberg, S. (1982). Residuals and influence in regression. Chapman and Hall. https://hdl.handle.net/11299/37076.
Creswell, J. W., & Creswell, J. D. (2018). Re-search design: Qualitative, quantitative, and mixed methods approaches (5th ed.). SAGE Publications.
https://us.sagepub.com/en-us/nam/r esearch-design/book255675
Department of Finance. (2024). PH records lowest 2023 inflation rate of 3.9% in De-cember, meets DBCC assumption of 6.0% for full year 2023. Department of Fi-nance, Republic of the Philippines. https://www.dof.gov.ph/ph-records-lowest-2023-inflation-rate-of-3-9-in-december-meets-dbcc-assumption-of-6-0-for-full-year-2023/
Durbin, J., & Watson, G. S. (1951). Testing for serial correlation in least squares regres-sion. II. Biometrika, 38(1–2), 159–178. https://doi.org/10.1093/biomet/38.1-2.159
Ferreira, F. H. G., & Ravallion, M. (2008). Glob-al poverty and inequality: A review of the evidence (Policy Research Working Paper No. 4623). World Bank. https://doi.org/10.1596/1813-9450-4623
Field, A. (2018). Discovering statistics using IBM SPSS Statistics (5th ed.). SAGE Publi-cations.
https://cmn-cdn-001.sagepub.com/books/titles/257672/att_sb1_87881.pdf
Greene, W. H. (2012). Econometric analysis (7th ed.). Pearson Education. https://economya.ir/wp-con-tent/uploads/econometric%20Analysis%20Greene-economya-ir-signed.pdf
Gujarati, D. N., & Porter, D. C. (2009). Basic econometrics (5th ed.). McGraw-Hill. https://www.mheducation.com/highered/product/basic-econometrics-gujarati/M9780073375779.html
Herman, H. (2021). Impact of inflation and city minimum wages on the human develop-ment index in Indonesia. Husnayain Busi-ness Review, 1(1), 1–10. https://doi.org/10.54099/hbr.v1i1.5
International Monetary Fund. (2023, April 3). Fiscal policy can help tame inflation and protect the most vulnerable. IMF Blog. https://www.imf.org/en/blogs/articles/2023/04/03/fiscal-policy-can-help-tame-inflation-and-protect-the-most-vulnerable
Klugman, J., Rodríguez, F., & Choi, H. (2011). The HDI 2010: New controversies, old critiques. The Journal of Economic Ine-quality, 9(2), 249–288.
https://link.springer.com/article/10.1007/s10888-011-9178-z
Ljung, G. M., & Box, G. E. P. (1978). On a meas-ure of lack of fit in time series models. Bi-ometrika, 65(2), 297–303. https://doi.org/10.1093/biomet/65.2.297
Mahmoud, A. R. (2025). The impact of inflation on purchasing power and living stand-ards. ResearchGate.
https://doi.org/10.13140/RG.2.2.32616.74241
Mankiw, N. G. (2021). Hill – Mankiw 9th EDN Chapter 1: Ten principles of economics | World Economics Association.
https://www.worldeconomicsassoci ation.org/commentaries/hill-manki w9ed-ch1/
Montgomery, D. C., Peck, E. A., & Vining, G. G. (2012). Introduction to linear regression analysis (5th ed.). Wiley. https://www.kwcsangli.in/uploads/3--Introduc-tion_to_Linear_Regression_Analysis__5th_ed._Douglas_C._Montgomery__Elizabeth_A._Peck__and_G._.pdf
Musa, Y., Zoramawa, A. B., & Shember, A. C. (2024). Assessing the impact of inflation and unemployment on poverty and the human development index in Nigeria. FUDMA Journal of Sciences, 8(2), 1–12. https://doi.org/10.33003/fjs-2024-0805-2518
Nasir, M., Kishwar, S., Meyer, M., & Barriga-Cabanillas, O. (2024). Losing to inflation: Unmasking the unequal price effect of in-flation across households (Policy Re-search Working Paper No. 11011). World Bank. https://doi.org/10.1596/1813-9450-11011
Nasrullah, M. J., Hussain, P., & Kumar, V. (2024). Inflation and Sustainable Human Development: Assessing the Role of Pub-lic Expenditures in Threshold Effect. IBT-Journal of Business Studies, 19(2), 179–199. https://ojs.ilmauniversity.edu.pk/index.php/ibtjbs/article/view/7
Nurinsana, F., & Sudirman. (2024). The effect of open unemployment rate, inflation rate, and investment on human develop-ment index (HDI) and poverty in South Sulawesi Province. ICOR: Journal of Re-gional Economics, 4(3), 155–165.
https://journal.uin-alaud-din.ac.id/index.php/icor/article/view/28978
Philippine Statistics Authority. (2019). Poverty statistics 2018. https://www.scribd.com/document/639590209/2018-Official-Poverty-Statistics-v1-June-04-2020#google_vignette
Philippine Statistics Authority. (2024). Sum-mary inflation report: Consumer price in-dex for the bottom 30% income house-holds (2018=100), December 2024. https://psa.gov.ph/content/summary-inflation-report-consumer-price-index-bottom-30-income-households-2018100-3
Paliova, I., McNown, R., & Nülle, G. (2019). Multiple dimensions of human develop-ment index and public social spending for sustainable development. IMF Working Papers, 2019(204).
https://www.elibrary.imf.org/view/journals/001/2019/204/article-A001-en.xml
Prais, S. J., & Winsten, C. B. (1954). Trend esti-mators and serial correlation (Cowles Commission Discussion Paper Stat No. 383). Cowles Commission. https://cowles.yale.edu/sites/default/files/files/pub/cdp/s-0383.pdf
Prebisch, R. (1950). The economic develop-ment of Latin America and its principal problems. United Nations Department of Economic Affairs, Economic Commission for Latin America (ECLA).
http://archivo.cepal.org/pdfs/cdPre bisch/002.pdf
Ramadhan, R., & Pertiwi, I. D. (2025). The in-fluence of the Gini ratio and inflation on the human development index (HDI). Quantitative Economics and Management Studies, 6(1), 1–12. https://doi.org/10.55942/pssj.v5i9.721
Ranis, G., Stewart, F., & Ramirez, A. (2000). Economic growth and human develop-ment. World Development, 28(2), 197–219. http://www.econ.yale.edu/~granis/papers/cp0546.pdf
Republic Act No. 10931. (2017). Universal Ac-cess to Quality Tertiary Education Act. Of-ficial Gazette of the Republic of the Phil-ippines.
https://www.officialgazette.gov.ph/2017/08/03/republic-act-no-10931
Republic Act No. 11223. (2019). Universal Health Care Act. Official Gazette of the Republic of the Philippines.
https://www.officialgazette.gov.ph/2019/02/20/republic-act-no-11223
Runtunuwu, P. C. H. (2020). Analysis of mac-roeconomic indicators and their effect on the human development index (HDI). So-ciety, 8(2), 596–610. https://doi.org/10.33019/society.v8i2.246
Schultz, T. W. (1961). Investment in human capital. The American Economic Review, 51(1), 1–17.
http://www.jstor.org/stable/1818907
Sen, A. (1999). Development as freedom. Alfred A. Knopf.
Stock, J. H., & Watson, M. W. (2020). Introduc-tion to econometrics (4th ed.). Pearson. https://www.sea-stat.com/wp-content/uploads/2020/08/James-H.-Stock-Mark-W.-Watson-Introduction-to-Econometrics-Global-Edition-Pearson-Education-Limited-2020.pdf
Suprapto, H. A., Sumaryoto, & Saleh, S. (2022). The roles of community consumption, in-flation, and the human development in-dex in economic growth in West Java. In-ternational Journal of Multidisciplinary: Applied Business and Education Research, 3(8), 1490–1499.
https://ejournals.ph/article.php?id=17366
Tamplin, T. (2025). Inflation. Finance Strate-gists.
https://www.financestrategists.com/wealth-manage-ment/macroeconomics/inflation/
United Nations Development Programme. (2023). Human development report 2023–24: Breaking the gridlock—Reimagining cooperation in a polarized world. UNDP. https://hdr.undp.org/content/human-development-report-2023-24
Wilk, M. B., & Gnanadesikan, R. (1968). Prob-ability Plotting Methods for the Analysis of Data. Biometrika, 55(1), 1. https://doi.org/10.2307/2334448
Wooldridge, J. M. (2013). Introductory econo-metrics: A modern approach (5th ed.). South-Western Cengage Learning. https://cbpbu.ac.in/userfiles/file/2020/STUDY_MAT/ECO/2.pdf
Wooldridge, J. M. (2019). Introductory Econo-metrics: A Modern Approach (7th Ed.). Cengage Learning.
World Bank. (2020). Philippines poverty as-sessment: Fostering more inclusive growth. World Bank.
Yolanda, Y. (2017). Analysis of Factors Affect-ing Inflation and its Impact on Human Development Index and Poverty in Indo-nesia. European Research Studies Journal, XX(4B), 38–56.
Downloads
Published
Issue
Section
Categories
License
Copyright (c) 2026 Hartzelle R. Capule, Dorothy Mae B. Pascual, Vyron Peter L. Santos, Vince Amiel S. M. Villavicencio
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors who publish with this journal agree to the following terms:
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See the Effect of Open Access).
