MONETARY REVIEWER LESSON 2

18問 • 1年前

問題一覧

• To manage the supply and cost of money and credit • To influence overall demand for goods and services • To attain price stability

Monetary Policy

When there is "too much money" in the economy supporting overall demand for goods & services which, in turn, increases inflationary pressures, the BSP "tightens" the faucet to reduce the money supply. This action dompons demand which could lead to lower inflation.*

Contractionary

• higher interest rates • less landing/borrowing • more savings • less spending

Contractionary

When there is "too little money" in the economy which dampens overall demand for goods and services, the BSP "loosens" the faucet to expand money supply.

Expansionary

• lower interest rates • more lending/borrowing • less savings • more spending

Expansionary

To better respond to these challenges, the conduct of central banking had also evolved through the adoption of different monetary policy frameworks.

• ECONOMIC AND FINANCIAL CHALLENGES OR CONDITIONS • CENTRAL BANK'S CHARTER • CENTRAL BANK'S BROAD POLICY OBJECTIVES • CENTRAL BANK'S MONETARY POLICY FRAMEWORK

Rehabilitation efforts after the war

1940s

Safeguarding initial growth efforts through exchange rate and trade controls

1950s

Heading toward a more market -determined exchange rate through decontrol of the Philippine peso

1960s

Stabilizing the economy on o sounder footing by managing the country' level of liquidity, foreign exchange, operating reserves, and domestic and foreign debt

1970s

Navigating through turbulent times by currency stabilization and financial reforms

1980s

Gaining policy independence essential to the achievement of long-run price stability objective

1990s

Moving towards Inflation Targeting to focus mainly on price stability as the primary objective of monetary policy

2000s to Present

POLICY DIRECTIONS 1940s 1950s 1960s 1970s 1980s 1990s 2000s to Present

1940s • Rehabilitation efforts after the war 1950s • Safeguarding initial growth efforts through exchange rate and trade controls 1960s • Heading toward a more market -determined exchange rate through decontrol of the Philippine peso 1970s • Stabilizing the economy on o sounder footing by managing the country' level of liquidity, foreign exchange, operating reserves, and domestic and foreign debt 1980s • Navigating through turbulent times by currency stabilization and financial reforms 1990s • Gaining policy independence essential to the achievement of long-run price stability objective 2000s to Present • Moving towards Inflation Targeting to focus mainly on price stability as the primary objective of monetary policy

POLICY IMPLEMENTED The Central Bank Act –›(15 June 1948) Amending Republic Act No. 265 The Central Bank Act –›(29 November 1972) New Central Bank Act –›(14 June 1993) RA 11211 Amending Republic Act No. 7653 The New Central Bank Act –›(14 February 2019)

The Central Bank Act –›(15 June 1948) • Central Bank of the Philippines was given developmental role to support recovery efforts of the country Amending Republic Act No. 265 The Central Bank Act –›(29 November 1972) • Central Bank charter shifted from development-oriented to one focused on maintaining internal and external monetary stability in the Philippines New Central Bank Act –›(14 June 1993) • New Central Bank Act passed into low-restructured and recapitalized central bank • Price stability as overriding objective RA 11211 Amending Republic Act No. 7653 The New Central Bank Act –›(14 February 2019) • Restoration of CB's authority to issue debt poppers as part of its regular operation gives the BSP greater flexibility in determining the timing and size of its monetary operations. • The reinstatement of the central bank's authority to require information from the non-bank private sector expands and upgrades the quantity and quality of the information set used by the BSP in policy formulation.

MONETARY POLICY FRAMEWORK • MONETARY AGGREGATE TARGETING • MODIFIED MONETARY AGGREGATE TARGETING • INFLATION TARGETING

MONETARY AGGREGATE TARGETING • Central Bank announces an annual growth target of monetary aggregates • Central Bank determines the level of money supply needed to achieve a desired level of inflation >M3 or domestic liquidity serves as the money supply > Base money as the operating target MODIFIED MONETARY AGGREGATE TARGETING • Greater emphasis on price stability instead of strictly attaining set targets for monetary aggregates • Enhanced effectiveness of monetary policy by complementing monetary aggregate targeting with some form Inflation targeting • Monetary targets could be exceeded as long as inflation targets are met • Monitors larger set of economic variables in making decisions regarding appropriate stance of monetary policy INFLATION TARGETING • Government sets inflation target (in consultation with BSP); BSP announces inflation target • BSP assesses monetary conditions and forecasts inflation • Is the inflation forecast in line with target? If YES, no change in policy settings If NO, BSP adjusts policy settings • BSP communicates through press statements, highlights of Monetary Board meetings, inflation reports, and open letter to the President

“.. For central bankers, understanding inflation dynamics in relation to other economic variables is crucial. Most, if not all, central bankers will agree with me that controlling inflation is a demanding task. ____, the central bank can influence inflation by _____ and ___________…”

- Yes - tightening and easing monetary policy

East Asian Financial Crisis, In the Philippines came in the downfall of the Marcos Regime in ______

1986

MONETARY REVIEWER LESSON 1

Shiela Caber · 11問 · 1年前

MONETARY REVIEWER LESSON 1