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  • Current Exchange Rate Policy

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    Pauline Lagto
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    The Bangko Sentral ng Pilipinas (BSP) uses a freely floating exchange rate system where the value of the peso is determined by foreign exchange supply and demand. The BSP operationalizes this policy using three tools: participation in the foreign exchange market, monetary policy measures, and foreign exchange regulations. The floating rate was adopted because large fluctuations under a fixed rate were seen as more costly and disruptive to the economy than the more gradual changes of a free float.

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    The Bangko Sentral ng Pilipinas (BSP) uses a freely floating exchange rate system where the value of the peso is determined by foreign exchange supply and demand. The BSP operationalizes this policy using three tools: participation in the foreign exchange market, monetary policy measures, and foreign exchange regulations. The floating rate was adopted because large fluctuations under a fixed rate were seen as more costly and disruptive to the economy than the more gradual changes of a free float.

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    © All Rights Reserved
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    10 views4 pages

    Current Exchange Rate Policy

    Uploaded by

    Pauline Lagto
    The Bangko Sentral ng Pilipinas (BSP) uses a freely floating exchange rate system where the value of the peso is determined by foreign exchange supply and demand. The BSP operationalizes this policy using three tools: participation in the foreign exchange market, monetary policy measures, and foreign exchange regulations. The floating rate was adopted because large fluctuations under a fixed rate were seen as more costly and disruptive to the economy than the more gradual changes of a free float.

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    © All Rights Reserved
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    CURRENT EXCHANGE

    RATE POLICY (bsp)


    Philippines exchange rate policy
    FREELY FLOATING EXCHANGE RATE SYSTEM
    - Bangko Sentral ng Pilipinas (BSP)
    leaves the determination of the exchange rate to
    market forces.

    -allows the value of the peso to be


    determined by the supply of and demand for
    foreign exchange.
    three general tools to operationalize the
    exchange rate policy

    • Participation in the foreign exchange market

    • Monetary policy measures

    • Foreign exchange regulations


    Why did the BSP adopt a floating rate system?
    The government considered that occasional,
    large fluctuations—typical of the fixed exchange
    rate system—are more costly, destabilizing and
    disruptive to the economy than the more frequent
    but more gradual changes that may occur in a
    free float.

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