MONETARY POLICY
The concept of
Monetary Policy
Monetary Policy consists
of the actions and decisions
made by the governmen...
•It is usually based on the
country’s fiscal policy.
•In the Philippines, the
monetary policy is
implemented by the
Moneta...
Objectives of
Monetary Policy
• More stable price level
• Opportunity for full
employment
• Low and stable rate of
inflati...
• Orderly foreign exchange
market
• Stable foreign exchange
market
• Adequate level of foreign
exchange reserves.
Tools of Monetary Policy
The central bank or
the monetary authorities
of a country have three(3)
instruments or tools by
w...
First Tool: Open Market
Operation
In this tool, the central
bank may buy or sell
government bonds or
securities or instrum...
Second Tool: Changing the
Reserve Ratio
Banks are required by the
government to have reserves,
which means that they shoul...
This percentage is called
reserve ratio.
Third Tool: The Discount Rate
Commercial banks also
borrow money, but not
only fr...
Situation A: Recession
Buy Securities

RECESSION

Reduce
Reserve Ratio
Lower
Discount Rate
During a recession, the
central bank may buy
securities to increase the
reserves, reduce the reserve
ratio to further incr...
and lower the discount
rate to encourage
commercial banks to
borrow from the central
bank to add to their
reserves.
Situation B: Inflation
Sell Securities

INFLATION

Increase
Reserve Ratio
Raise
Discount Rate
During inflation, the
central bank may sell
securities to reduce the
reserves of commercial
banks, increase the reserve
ra...
and raise the discount
rate so that commercial
banks will not be
encouraged to borrow
from the central bank.
Philippines Monetary Policy
As mandated by R.A. 7653,
the main objective of this is to
promote a low and stable
inflation ...
The Inflation Target
The inflation target set
by the BSP is based on the
average year-on-year
change in the consumer
price...
The Monetary And
Financial Sectors
The Bangko Sentral ng
Pilipinas is only the central
financial authority in the
country.
However, it is not the only
financial institution that
offers monetary and
financial services. There
are also institutions...
The Philippines Banking System
 Universal and Commercial
banks
-These have the largest
resources and offer the
widest ser...
 Thrift Banks
- consist of savings and
mortgage banks, private
development banks, stock
savings and loan
associations and...
 Rural and Cooperative
Banks
- these are very
popular in the provinces
and in rural areas.
 Microfinance Banks
-are the latest in the
banking system and focus on
providing loans and financial
services for the mic...
Aside from those, there are
also other financial institutions
that provide financing. First is
Cooperatives, which are
org...
Pawnshops also provide small
loans to people on the basis of
a physical collateral or
guarantee, such as jewelry or
househ...
Learning About Money
‘’money makes the
world go round’’
What is money?
In economics, money may be
defined as follows:
 Money is any common
medium of exchange
acceptable in payme...
 Money is what we use to buy
things with.
Money is anything generally
acceptable as a medium of
exchange.
Although money may not
be used in all economic
activities, it is money which
makes economic
transactions easier.
Functions of Money
 Medium of Exchange
-this is the foremost
function of money.
-it serves as a convenient
tool for the e...
 Measure of Value
-people use money as a
standard in measuring the
value or worth of goods and
services.
 Store of Value
-money is a good way to
store wealth because it is
very liquid, meaning the
moment you have it you can
im...
Features of Money

 General Acceptability
- individuals and businesses
accept money as part of long
business practice, an...
 Legal Tender
- money is declared as a
legal tender by
government, which means
that its acceptability and
legality are de...
 Divisibility
- money, even when
divided into
denominators, has the
quality of divisibility.
Recognizable
- part of the acceptability
of money is its being
recognizable by all sectors of
the economy.
Money in the Philippines
The basic unit of
monetary value in the
Philippines is the peso,
represented by the letter P
trav...
The Bangko Sentral ng Pilipinas
As part of the
country’s monetary policy,
the money supply is
controlled and managed
by th...
Highlights of Central Banking
History
• 1990 – The First Philippine
Commission placed all banks
under the Bureau of Treasu...
• 1939 – Under the
Commonwealth government
• 1946 – a joint PhilippineAmerican Finance
Commission
• 1947 – Central Bank
co...
• 1948 – a bill establishing
the Central Bank of the
Philippines was submitted to
Congress by Pres. Roxas.
• 1949 – The Ce...
• 1972 – Presidential Decree
No. 72 was issued.
• 1981 – Presidential Decree
No. 1771 was issued
• 1986 – composition of t...
• 1993 – The Bangko
Sentral ng Pilipinas was
formally established.
Vision and Mission of the BSP
VISION
The BSP, imbued with
the values of integrity,
excellence and patriotism,
aims to be a...
And a catalyst for a globally
competitive economy and
financial system that
delivers a high quality of
life for all Filipi...
MISSION
BSP is committed to promote
and maintain price stability and
provide proactive leadership in
bringing about a stro...
Towards this end, it shall
conduct sound monetary
policy and effective
supervision over
financial institutions
under its j...
Overview of BSP Functions
and Operations
• Liquidity Management
• Currency Issue
• Lender of Last Resort
• Financial Super...
• Determination of
Exchange Rate Policy
• Other Activities
The Monetary Board
Chairman: Amando M.
Tetangco, Jr.
Members: Cesar V. Purisima
Alfredo C. Antonio
Ignacio R. Bunye
Peter ...
Major Functions:
1. Issue rules and regulations.
2. Direct management,
operations, and
administration of BSP…
3. Establish...
4. Adopt an annual budget
and authorize such
expenditures by BSP…
5. Indemnify its members
and other officials of
BSP…
The Governor
The governor is the chief
executive officer of BSP and
is required to direct and
supervise the operations and...
Governor's duties and
responsibilities:
1. Prepares the agenda…
2. Executes and administers
policies and measures…
3. Appo...
4. Renders
opinion, decisions, or
rulings…
5. Exercises such other
powers…
6. Represents the Monetary
Board and BSP…
7. Si...
Advocacies of the BSP
The BSP has advocated
projects on poverty
alleviation, anti-money
laundering, and public
financial l...
International Financial Bodies
And Foreign Aid
Efforts to better economies
of nations are also made by
international finan...
Some of these international
financial bodies are the
following:
• World Bank- an international
institution that provides
f...
• International Monetary Fund
-this is actually a specialized
agency of the UN, the objective
of which is to promote
inter...
• Foreign Loan Providers
- these are countries
which provide development
loans or credits to less
developed countries or L...
Among the criticisms of
foreign aid are the following:
1.
2.
3.
4.

Too much dependency
Too much intrusion
Too much bureau...
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  1. 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. 2. •It is usually based on the country’s fiscal policy. •In the Philippines, the monetary policy is implemented by the Monetary Board through the Central Bank of the Philippines
  3. 3. Objectives of Monetary Policy • More stable price level • Opportunity for full employment • Low and stable rate of inflation
  4. 4. • Orderly foreign exchange market • Stable foreign exchange market • Adequate level of foreign exchange reserves.
  5. 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. 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. 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. 8. This percentage is called reserve ratio. Third Tool: The Discount Rate Commercial banks also borrow money, but not only from the central bank.
  9. 9. Situation A: Recession Buy Securities RECESSION Reduce Reserve Ratio Lower Discount Rate
  10. 10. During a recession, the central bank may buy securities to increase the reserves, reduce the reserve ratio to further increase their reserves,
  11. 11. and lower the discount rate to encourage commercial banks to borrow from the central bank to add to their reserves.
  12. 12. Situation B: Inflation Sell Securities INFLATION Increase Reserve Ratio Raise Discount Rate
  13. 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. 14. and raise the discount rate so that commercial banks will not be encouraged to borrow from the central bank.
  15. 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. 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. 17. The Monetary And Financial Sectors The Bangko Sentral ng Pilipinas is only the central financial authority in the country.
  18. 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 country’s monetary sector.
  19. 19. The Philippines Banking System  Universal and Commercial banks -These have the largest resources and offer the widest services.
  20. 20.  Thrift Banks - consist of savings and mortgage banks, private development banks, stock savings and loan associations and microfinance thrift banks.
  21. 21.  Rural and Cooperative Banks - these are very popular in the provinces and in rural areas.
  22. 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. 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. 24. Pawnshops also provide small loans to people on the basis of a physical collateral or guarantee, such as jewelry or household appliances.
  25. 25. Learning About Money ‘’money makes the world go round’’
  26. 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. 27.  Money is what we use to buy things with. Money is anything generally acceptable as a medium of exchange.
  28. 28. Although money may not be used in all economic activities, it is money which makes economic transactions easier.
  29. 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. 30.  Measure of Value -people use money as a standard in measuring the value or worth of goods and services.
  31. 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. 32. Features of Money  General Acceptability - individuals and businesses accept money as part of long business practice, and generally trust its value, anywhere.
  33. 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. 34.  Divisibility - money, even when divided into denominators, has the quality of divisibility.
  35. 35. Recognizable - part of the acceptability of money is its being recognizable by all sectors of the economy.
  36. 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. 37. The Bangko Sentral ng Pilipinas As part of the country’s monetary policy, the money supply is controlled and managed by the central bank.
  38. 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. 39. • 1939 – Under the Commonwealth government • 1946 – a joint PhilippineAmerican Finance Commission • 1947 – Central Bank council was formed.
  40. 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. 41. • 1972 – Presidential Decree No. 72 was issued. • 1981 – Presidential Decree No. 1771 was issued • 1986 – composition of the Monetary Board was amended.
  42. 42. • 1993 – The Bangko Sentral ng Pilipinas was formally established.
  43. 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. 44. And a catalyst for a globally competitive economy and financial system that delivers a high quality of life for all Filipinos.
  45. 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. 46. Towards this end, it shall conduct sound monetary policy and effective supervision over financial institutions under its jurisdiction.
  47. 47. Overview of BSP Functions and Operations • Liquidity Management • Currency Issue • Lender of Last Resort • Financial Supervision •Management of Foreign Currency Reserves
  48. 48. • Determination of Exchange Rate Policy • Other Activities
  49. 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. 50. Major Functions: 1. Issue rules and regulations. 2. Direct management, operations, and administration of BSP… 3. Establish a human resources management system…
  51. 51. 4. Adopt an annual budget and authorize such expenditures by BSP… 5. Indemnify its members and other officials of BSP…
  52. 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. 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. 54. 4. Renders opinion, decisions, or rulings… 5. Exercises such other powers… 6. Represents the Monetary Board and BSP… 7. Signs contracts…
  55. 55. Advocacies of the BSP The BSP has advocated projects on poverty alleviation, anti-money laundering, and public financial literacy.
  56. 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. 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. 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. 59. • Foreign Loan Providers - these are countries which provide development loans or credits to less developed countries or LCDs.
  60. 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
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