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MONPOL

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MONPOL
1) State briefly the development of a central bank.
- From Central Bank of the Philippines it became Bangko Sentral ng Pilipinas. It was established in July 1993 as an independent central monetary authority pursuant to R.A. No. 7653 which restructured the old Central Bank of the Philippines. The BSP’s main responsibility is to formulate and implement policy in the areas of money, banking, and credit.
2) What are the objectives of the BSP?
- The BSP’s main primary objective is to maintain price stability conducive to balanced and sustainable economic growth. The BSP also aims to promote and preserve monetary stability and the convertibility of the national currency.
3) Discuss one function of the BSP. Do you think moral suasion is an effective monetary tool?
- Under the New Central Bank Act of 1993, one function of the BSP of which relate to its status as the Republic’s central monetary authority is that, it has the exclusive power to issue the national currency. All notes and coins issued by the BSP are fully guaranteed by the Government and are considered legal tender for all private and public debts. Moral suasion is an effective monetary tool because this are the influence which the central bank exercises to induce or convince banks to conduct operations in a manner that would contribute to the attainment of monetary goals but not necessarily support the profit-maximizing objectives of the banks.
4) What are the monetary tools used by the BSP? Discuss one.
- The monetary tools used by the BSP are: (1) Open Market, (2) Reserve Requirement, (3) Rediscounting, and (4) Moral Suasion. The reserve requirement is the portion of deposits and deposit substitute liabilities that banks and/or quasi-banks are required to set aside to allow the BSP to have greater control over liquidity conditions and to help protect depositors by ensuring that banks have sufficient cash on hand to service depositors’ withdrawals.
5) What are the functions of money?
- Money provides

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