FIN 106 MONETARY POLICY AND CENTRAL BANKING

“CENTRAL BANK IN THE PHILIPPINES

AND ITS TOOLS TO ALTER MONEY
SUPPLY”

What is Central Bank?

Central Regulating Economic
Bank money in Growth
circulation

A central bank is a
public institution that
manages the currency
of a country or group of
countries and controls
the money supply

How does the central bank control money

supply in the economy?
REGULATES
To ensure a nation's economy remains
healthy, its central bank regulates the
amount of money in circulation.

INTEREST RATES
Influencing interest rates, printing money, and
setting bank reserve requirements are all tools
central banks use to control the money
supply.

BONDS AND SECURITIES

Other tactics central banks use include open
market operations and quantitative easing,
which involve selling or buying up
government bonds and securities.

These indicators tell whether to increase or decrease the

supply.

includes currency in circulation. It is the base

measurement of the money supply and
M1: Narrow Money includes cash in the hands of the public, both
bills and coins, plus peso demand deposits,
tourists’ checks from non-bank issuers, and
other checkable deposits.

This is termed broad money because M2

includes a broader set of financial assets held
M2: Broad Money principally by households. This contains all of
M1 plus peso saving deposits (money market
deposit accounts), time deposits and balances
in retail money market mutual funds.

M3: Broad Money Broad Money Liabilities include M2 plus

money substitutes such as promissory notes
Liabilities and commercial papers.

These include M3 plus transferable deposits,

treasury bills and deposits held in foreign
currency deposits. Almost all short-term,
M4: Liquidity Money highly liquid assets will be included in this
measure.