Big Picture A

Week 1-2: Unit Learning Outcomes (ULOb): At the end of the unit, you are
expected to:

a. Demonstrate deep understanding of Philippine’s monetary system and its standards

and be able to determine the value and measures of money

Big Picture in Focus: ULOb. Demonstrate deep understanding of

Philippine’s monetary system and its standards and be able to
determine the value and measures of money.

Metalanguage
In this section, the most essential terms relevant to understand the importance and
understand the concept of the Philippine Monetary System which shall be operationally
defined and illustrated to establish a common framework of reference as to how this
contributes to your chosen field or career and even in your daily lives. Along the discussion,
you will familiarize and encounter these terms and concepts to demonstrate the
characteristics inculcated by the monetary system in the Philippines.
Please proceed immediately to the “Essential Knowledge” part since the first lesson is also
definition of essential terms.

Essential Knowledge

Before you proceed further with the topic, it is highly important to rationalize discussion
pertaining to the different writing processes to help you understand the concept of monetary
system.

1. Monetary System – is a country’s national affair in which the central government usually
acquires a monopoly or near control of monetary affairs, minimizing state and local
difference and facilitating production and trade on a national basis. The country’s monetary
system is determined and defined by laws that are passed from time to time.
2. Kinds of Monetary Standards
2.1 Monometallic Standard – a monetary system in which the monetary unit is kept at
par with a fixed weight of value of gold. Stability of money value and exchange rates
was observed under this standard because of fixed gold value.
2.1.1 Gold coin standard – Monetary unit is defined in terms of coins containing a
certain amount of gold with prescribed purity of fineness.
2.1.2 Gold bullion standard – All gold is under control of government which
decreased the demand for gold and made it possible to issue a larger amount
of money on the same gold base. This gives monetary authorities more
flexibility in regulating the monetary supply and makes international monetary
management easier.
2.1.3 Gold exchange standard – Under this system, the money of a country is
redeemable, not in gold, but in the currency of a foreign country.
2.2 Silver Standard – This monetary system uses silver as the standard metal. The
set-up under silver standard and its operation are the same as those for gold standard.
Types are silver coin standard, silver bullion standard and silver exchange standard.
2.3 Bimetallic Standard –Using both gold and silver in coinage, this monetary
standard provides for a broader metallic base if there is a shortage of gold. Thus,
purchasing power is more stable due to non-dependence on a single metal value.
 2.4 Fiat Standard – This is a monetary system in which the face value of money is
higher than the value of materials used for coinage.

3. Characteristics of Philippine Currency – The Bangko Sentral ng Pilipinas has the sole
power and authority to issue currency within the territory of the Philippines. No other
person or entity, public or private, may out into circulation notes, coins or any other object
or document which, in the opinion of the Monetary Board, might circulate currency. The
notes and coins issued by the BSP shall be liabilities of the Bangko Sentral and may be
issued only against and in amounts nor exceeding the assets of the Bangko Sentral, the
Monetary Board, with the approval of the President of the Philippines, shall prescribe the
following features:
3.1 Denominations, including the face value of each coin and paper bill
3.2 Dimensions or the sizes of coins and paper bills
3.3 Designs and inscriptions such as graphics or text printed on money
3.4 Colors or variations in color among denominations for easy recognition
3.5 Weights of paper, metal or alloys
4. Philippine Numismatic History
4.1 Early Philippine Coins
4.2 Currency during the Spanish Occupation
4.3 Currency of the Philippine Republic
4.4 Currency during the American Occupation
4.5 Currency of the Commonwealth
4.6 Currency during the Japanese Occupation
4.7 Currency of the Philippine Republic of 1946
4.8 The New BSP Coin Series (1995)
4.9 The New Generation Currency
5. The Mint – In 1969, the idea of Filipino craftsmen making Philippine money emerged
because currency shortages were common in the Philippines and many other countries.
On May 19, 1966, Congress passed Republic Act No. 4700 authorizing Department of
General Services to acquire printing equipment for making banknotes. Presidential
Decree no. 783 dated August 27, 1975 amending PD No. 484 authorized the
establishment of the Security Printing Plant, Mint and Gold Refinery of the Central Bank.
Inaugurated on September 7, 1978, this facility is responsible for printing banknotes and
security instruments like checks, minting of coins and refining gold and silver. The mint,
which started producing coins in November 1977 and banknotes in January 1978, can
produce 384 million banknotes and 120 million coins a year. This saves our economy
nearly $5.5 million yearly, money which would have been spent on commissioning foreign
ministers and printers. The plant is a concrete symbol of our country’s efforts towards
self-efficacy.
6. Theories about Value of Money
6.1 Quantity Theory –asserts proposition implicit in Cantillon’s statement which
emphasizes that an increase in the quantity of money in a country causes people to
spend more and this shall result to increase in spending and shall lead to a similar
increase in the nominal National Income or Gross National Product.
6.2 Transactions Velocity Approach – also known as classical theory of money
according to Fisher which implies that the more money the people have, the more
they spend, the greater the nominal national in the sale of goods and services. Thus,
money value is equivalent to the interaction between supply and demand forces.
6.3 Cash-Balance Theory – proposed that money value is equivalent to the cash balance
of people during a specific period. This refers to the amount of cash people have to
spend after allotting an amount for savings or investment from their personal income.
 Thus, people use their personal income according to their individual consumption,
savings and investment patterns.
6.4 Income Theory – assumes that money in the hands of people is a equivalent to the
cost oof production for a specific period. The cost of production is the Gross National
Product, which includes consumer, capital, foreign and government goods.
7. Current Measures of Money
7.1 Transaction Balances – consists of perfectly liquid assets or funds that are generally
acceptable for immediate transactions which includes currency, traveler’s check, non-
interest-bearing checking accounts, or other checkable deposits and is considered to
be the narrowest measure of money
7.2 Non-transaction Balances – referred to as a broader measure of money which
consists of plus savings deposits, small-denomination time deposits, private money
market mutual funds, money market deposit accounts and overnight repurchase
agreements. These items can be used for payments, albeit usually with some delay
because these have to be transferred by check. This broader measure emphasizes
the store-of-wealth-value function of money more than its medium-of-exchange
function.
7.3 Transaction plus Non-Transaction Balances – includes large-denomination time
deposits and institutional money market mutual funds and repurchase agreement.

Self-Help: You can also refer to the sources below to help you further
understand the lesson

Alminar-Mutya, R. (2017). Introduction to Philippine Money, Credit and Banking.

Manadaluyong: Anvil Publishing, Inc.

Walsh, C. (2017). Money, theory and policy. 4th Edition. Cambridge, MA: MIT
Press