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BSP Monetary Tools

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by

May Barlaan

on 28 September 2012

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Transcript of BSP Monetary Tools

BSP MONETARY TOOLS *Purchase of Forex Monetary Tool #1
PURCHASE / SHARE OF FOREIGN EXCHANGE the buying and selling of government securities (e.g. Treasury Bills) in the open market. Monetary Tool #2
OPEN MARKET OPERATIONS that portion of deposits that a commercial bank
sets aside as vault cash Monetary Tool #3
RESERVE REQUIREMENTS commercial banks borrow money from the BSP; the BSP can set the limit to the funds they borrow and designate the interest rate at which it lends. Monetary Tool #4
DISCOUNT RATE POLICY / REDISCOUNTING *What is the Money Multiplier (Process)? the BSP has the power to make credit difficult or
easy for certain industries to regulate MS Monetary Tool #5
SELECTIVE CONTROLS Increase Money Supply *Sale of Forex Decrease Money Supply *Bsp BUYS government securities *Bsp SELLS government securities Increase in MS Decrease in MS *LOW required reserves increase the MS and the money multiplier* *HIGH required reserves decrease the MS and the money multiplier* the process through which an original deposit to the banking system is multiplied after a series of regular deposit and reloaning. MMCoefficient = 1 / RR(required reserve) *low rediscount rate *high rediscount rate increase in MS decrease in MS the BSP holds session with commercial banks to
lead them toward the attainment of nation goals Monetary Tool #6
MORAL SUASION *A more effective growth strategy is supported by: The Role of Monetary Policy in Growth high positive interest rate liberalization of foreign trade liberalization of foreign trade
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