The evolution of the philippine monetary policy essay

In doing so, other economic goals, such as promoting financial stability and achieving broad-based, sustainable economic growth, are given consideration in policy decision-making.

It focuses on maintaining a low level of inflation, that which is considered to be optimal, or at least would allow the country to have ample economic growth. In effect, under the monetary targeting framework, the BSP controls inflation indirectly by targeting money supply.

Gold coins with the portrait of Queen Isabela were minted in Manila. Liquidity trap is defined as a situation in which there are zero nominal interest rates, persistent deflation and deflation expectations. These coins circulated over years from to These coins called the Dos Mundos or Columnarias.

It has a irregular, oddly-shaped coins stamped with a cross on the other side side and a royal coat of armson the other. Inflation Targeting[ edit ] As mentioned earlier, Inflation Targeting requires a public announcement of an inflation rate that a country will target for the coming years, or in a given period of time.

Coins from other Spanish colonies also reached the Philippines and were counter stamped. Philippines During the Spanish occupation, when they came here in the Philippines in they brought with them the first European coin called teston.

This happens when inflation rate declines too much leading to a threat of deflation. Ideally, the government could raise tax revenues to avoid borrowing huge sums from the market.

The Philippine Currency Evolution

In the event this occurs, bonds and money earn the same real rate of return thus making people indifferent to holding bonds or excess money.

Moreover, it is also assumed that a shift of approach was necessary because money aggregates are normally not good indicators of future economic policy requirements due to unreliability of measurement.

The new design series of banknotes issued in replaced the ABL series. During the reign of King Philip the fifth of Spain the first rounded machine struck coins with milted edges appeared.

In the absence of fiscal discipline, an independent central bank such as the BSP cannot guarantee a stable nominal anchor. Its main desire is to achieve price stability as the ultimate end goal of the monetary policy.

Although the BSP has adopted the inflation targeting approach, it may be tempted to inexplicitly target exchange rate to achieve its low inflation target. This means that there is a long-run relationship between money on one hand and output and interest rate on the other so that even if there are shocks in the economy, the variables will return to their trend equilibrium levels.

Certain key modifications include: It keeps aggregate demand from growing rapidly with resulting high inflation, or from growing too slowly, resulting in high unemployment. Errors in CPI measurement could lead to ineffective and unsuitable monetary policy response by the BSP which definitely result to detrimental effects to the economy.

Forinflation target has been set to be 3. When the Galleon trade exercised the earliest coins during the Spanish colonization was the Macuqinas or the cobs. It came the time of the coins?

It provides policy directions in the areas of money, banking and credit and exists to supervise operations of banks and exercises regulatory powers over non-bank financial institutions.

This approach is based on the assumption that there is a stable and predictable relationship between money, output and inflation. June to Present[ edit ] The BSP employs a modified framework beginning the second semester of in attempt to enhance the effectiveness of the monetary policy by complementing monetary aggregate targeting with some form of inflation targeting, placing greater emphasis on price stability.

In particular, all money aggregates, with the exception of reserve money, are incorporated with output and interest rate. In other words, for the BSP to successfully focus on price stability, there must be a credible commitment on the part of the National Government to reduce total fiscal deficits by a meaningful amount.

Also it is the first silver coin. It features a visual narration of the development of the Philippine economy parallel to the evolution of its currency. On the other hand, under the new framework, BSP sets monetary policy so that price level is not just zero in expectation but is also zero regardless of latter shocks.

With this approach, the BSP can exceed the monetary targets as long as the actual inflation rate is kept within program levels and policymakers monitor a larger set of economic variables in making decisions regarding the appropriate stance of monetary policy.Essay about The Evolution of the Philippine Monetary Policy THE EVOLUTION OF THE PHILIPPINE MONETARY POLICY I.

INTRODUCTION * The chief monetary authority of the Philippines is the Bangko Sentral ng Pilipinas or BSP.

quantitative evidence to support recent exhaustive reviews of the evolution of monetary policy frameworks in Asia and the ASEAN region (e.g. Morgan,IMF, ). The remainder of the paper is organized as follows.

BIS Papers No 49 Measurement of inflation and the Philippine monetary policy framework Diwa C Guinigundo1 For an inflation-targeting central bank, the choice of price index should reflect the most.

Monetary policy is the monitoring and control of money supply by a central bank, such as the Federal Reserve Board in the United States of America, and the Bangko Sentral ng Pilipinas in the Philippines.

This is used by the government to be able to control inflation, and stabilize currency.

Monetary policy of the Philippines

During the Spanish occupation, when they came here in the Philippines in they brought with them the first European coin called teston. Also it is the first silver coin. When the Galleon trade exercised the earliest coins during the Spanish colonization was the Macuqinas or the cobs.

When the Americans took over the Philippines inthe US Congress passed the Philippine Coinage Act, which authorized the mintage of silver coins from to Subsequently, Silver Certificates were issued until

The evolution of the philippine monetary policy essay
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