This describes the Philippine Monetary Policy. This slideshow contains a brief history of the Philippine Monetary System and of the Bangko Sentral ng Pilipinas. This also contains the functions of money and how the BSP uses it to the Philippines' advantage.

1. MONETARY POLICY

2. Monetary Policy
 Involves the regulation of the
following:
◦ Money Supply
◦ Credit
◦ Interest Rates
to Control the level of spending in
the economy.
 It influences the general price and
the level of liquidity in the economy.
 It is a measure or action undertaken

3. Philippine Monetary Policy
 It is in the primary duty of the
Bangko Sentral ng Pilipinas (BSP)

4. BSP’s Monetary Policy
 Its primary objective is:
◦To Promote a low and stable
inflation conducive to a
balanced and sustainable
economy.
 This aims at influencing the Timing,
Cost and Availability of Money and
Credit to stabilize price levels

5. Two types of Monetary Policy
 Expansionary
◦ Refers to a monetary policy setting that
intends to increase the level of
liquidity/money supply which could result
in a relatively higher inflation in the
economy.
◦ It encourages economic activity as more
funds are available for lending by banks to
business investors which increases
aggregate demand which fuels inflation in
the economy.

6. Expansiona
ry Monetary
Policy
Money Supply
Increases
Interest Rates Falls
Investment
Increases
Aggregate Demand
Increases
Aggregate Output
Increases
Price Levels
Increases

7. Two types of Monetary Policy
 Contractionary
◦ Refers to a monetary policy setting that
intends to decrease the level of
liquidity/money supply which could result in
a relatively lower inflation in the economy.
◦ It tends to limit economic activity as lees
funds are available for lending by banks to
business investors which decreases
aggregate demand which tempers inflation
in the economy.

8. Contractionary
Monetary
Policy
Money Supply
Decreases
Interest Rates
Increases
Investment
Decreases
Aggregate Demand
Declines
Aggregate Output
Decreases
Price Levels
Decreases

9. MONEY

10.  Money Supply
◦ It is anything that is generally accepted as
payment for goods or services or in the
repayment of debts
◦ Money is distinct from wealth and income.

11.  Money Supply
◦ Refers to the amount of money in circulation
in the economy.
◦ Comprises of:
 M1 = the currency in circulation (those
outside depository corporations
and peso demand deposits)
 M2 = broad money which consists of
M1, peso savings and time deposits
 M3 = broad money liabilities which consist
of M2 plus peso deposit
substitutes such as
promissory notes and commercial
papers (securities)
 M4 = consist of M3 plus transferrable and

12.  Functions of Money
◦ Money as a Medium of Exchange

13.  Functions of Money
◦ Money as a Unit of Account

14.  Functions of Money
◦ Money as a Store of Value

15. Inflation Targeting: the BSP’s
Approach to Monetary Policy
 This is focused mainly on achieving
a low and stable inflation. This
approach entails the announcement
of an explicit inflation target by the
BSP.