1. MONETARY POLICY The concept of Monetary Policy Monetary
Policy consists of the actions and decisions made by the government
to create appropriate monetary conditions.
2. It is usually based on the countrys fiscal policy. In the
Philippines, the monetary policy is implemented by the Monetary
Board through the Central Bank of the Philippines
3. Objectives of Monetary Policy More stable price level
Opportunity for full employment Low and stable rate of
inflation
5. Tools of Monetary Policy The central bank or the monetary
authorities of a country have three(3) instruments or tools by
which they can influence the money supply.
6. First Tool: Open Market Operation In this tool, the central
bank may buy or sell government bonds or securities or instruments
in the open market.
7. Second Tool: Changing the Reserve Ratio Banks are required
by the government to have reserves, which means that they should
set aside a certain percentage of the amount of deposits they
have.
8. This percentage is called reserve ratio. Third Tool: The
Discount Rate Commercial banks also borrow money, but not only from
the central bank.
13. During inflation, the central bank may sell securities to
reduce the reserves of commercial banks, increase the reserve ratio
to further decrease theirs reserves,
14. and raise the discount rate so that commercial banks will
not be encouraged to borrow from the central bank.
15. Philippines Monetary Policy As mandated by R.A. 7653, the
main objective of this is to promote a low and stable inflation and
price stability to a balanced and sustainable growth of the
economy.
16. The Inflation Target The inflation target set by the BSP is
based on the average year-on-year change in the consumer price
index (CPI) over the calendar year.
17. The Monetary And Financial Sectors The Bangko Sentral ng
Pilipinas is only the central financial authority in the
country.
18. However, it is not the only financial institution that
offers monetary and financial services. There are also institutions
called banks, which are also a main component of the countrys
monetary sector.
19. The Philippines Banking System Universal and Commercial
banks -These have the largest resources and offer the widest
services.
20. Thrift Banks - consist of savings and mortgage banks,
private development banks, stock savings and loan associations and
microfinance thrift banks.
21. Rural and Cooperative Banks - these are very popular in the
provinces and in rural areas.
22. Microfinance Banks -are the latest in the banking system
and focus on providing loans and financial services for the
microenterprises of low-income individuals and families
23. Aside from those, there are also other financial
institutions that provide financing. First is Cooperatives, which
are organized by the people themselves who become partowners or
shareholders.
24. Pawnshops also provide small loans to people on the basis
of a physical collateral or guarantee, such as jewelry or household
appliances.
25. Learning About Money money makes the world go round
26. What is money? In economics, money may be defined as
follows: Money is any common medium of exchange acceptable in
payment for goods/services/for the settlement of debts.
27. Money is what we use to buy things with. Money is anything
generally acceptable as a medium of exchange.
28. Although money may not be used in all economic activities,
it is money which makes economic transactions easier.
29. Functions of Money Medium of Exchange -this is the foremost
function of money. -it serves as a convenient tool for the exchange
of goods.
30. Measure of Value -people use money as a standard in
measuring the value or worth of goods and services.
31. Store of Value -money is a good way to store wealth because
it is very liquid, meaning the moment you have it you can
immediately spend it.
32. Features of Money General Acceptability - individuals and
businesses accept money as part of long business practice, and
generally trust its value, anywhere.
33. Legal Tender - money is declared as a legal tender by
government, which means that its acceptability and legality are
derived from the law.
34. Divisibility - money, even when divided into denominators,
has the quality of divisibility.
35. Recognizable - part of the acceptability of money is its
being recognizable by all sectors of the economy.
36. Money in the Philippines The basic unit of monetary value
in the Philippines is the peso, represented by the letter P
traversed by an equal sign.
37. The Bangko Sentral ng Pilipinas As part of the countrys
monetary policy, the money supply is controlled and managed by the
central bank.
38. Highlights of Central Banking History 1990 The First
Philippine Commission placed all banks under the Bureau of
Treasury. 1929 The Bureau of Banking under the Department of
Finance
39. 1939 Under the Commonwealth government 1946 a joint
PhilippineAmerican Finance Commission 1947 Central Bank council was
formed.
40. 1948 a bill establishing the Central Bank of the
Philippines was submitted to Congress by Pres. Roxas. 1949 The
Central Bank of the Philippines was formally inaugurated.
41. 1972 Presidential Decree No. 72 was issued. 1981
Presidential Decree No. 1771 was issued 1986 composition of the
Monetary Board was amended.
42. 1993 The Bangko Sentral ng Pilipinas was formally
established.
43. Vision and Mission of the BSP VISION The BSP, imbued with
the values of integrity, excellence and patriotism, aims to be a
world-class monetary authority
44. And a catalyst for a globally competitive economy and
financial system that delivers a high quality of life for all
Filipinos.
45. MISSION BSP is committed to promote and maintain price
stability and provide proactive leadership in bringing about a
strong financial system conductive to a balanced and sustainable
growth of the economy.
46. Towards this end, it shall conduct sound monetary policy
and effective supervision over financial institutions under its
jurisdiction.
47. Overview of BSP Functions and Operations Liquidity
Management Currency Issue Lender of Last Resort Financial
Supervision Management of Foreign Currency Reserves
48. Determination of Exchange Rate Policy Other Activities
49. The Monetary Board Chairman: Amando M. Tetangco, Jr.
Members: Cesar V. Purisima Alfredo C. Antonio Ignacio R. Bunye
Peter B. Favila Felipe M. Medalla Armando L. Suratos
50. Major Functions: 1. Issue rules and regulations. 2. Direct
management, operations, and administration of BSP 3. Establish a
human resources management system
51. 4. Adopt an annual budget and authorize such expenditures
by BSP 5. Indemnify its members and other officials of BSP
52. The Governor The governor is the chief executive officer of
BSP and is required to direct and supervise the operations and
internal administration of BSP.
53. Governor's duties and responsibilities: 1. Prepares the
agenda 2. Executes and administers policies and measures 3.
Appoints and fixes the remunerations and other emoluments
54. 4. Renders opinion, decisions, or rulings 5. Exercises such
other powers 6. Represents the Monetary Board and BSP 7. Signs
contracts
55. Advocacies of the BSP The BSP has advocated projects on
poverty alleviation, anti-money laundering, and public financial
literacy.
56. International Financial Bodies And Foreign Aid Efforts to
better economies of nations are also made by international
financial bodies, which put a great deal into helping, particularly
on the development side through foreign aid.
57. Some of these international financial bodies are the
following: World Bank- an international institution that provides
financial aid and technical assistance to developing countries all
over the world.
58. International Monetary Fund -this is actually a specialized
agency of the UN, the objective of which is to promote
international monetary cooperation and the growth of world trade,
and coordinate multilateral payment among member states.
59. Foreign Loan Providers - these are countries which provide
development loans or credits to less developed countries or
LCDs.
60. Among the criticisms of foreign aid are the following: 1.
2. 3. 4. Too much dependency Too much intrusion Too much
bureaucracy Too much corruption