Homework Question on Evolution of the Philippine Monetary System
- Select a foreign country and analyze its monetary system. Research the country’s monetary system using at least five scholarly sources, including a minimum of three from the Ashford Online Library.
- Your analysis should be a three to five page paper formatted according to APA style guidelines. Address the following aspects in your paper:
- Analyze the evolution of the country’s monetary system, including the impact of any fiscal monetary and trade policies.
- Describe the major components of the monetary system, including organizations and financial institutions.
- Describe the currency exchange rates and any significant impacts on the exchange rates.
- Analyze the issues around economic exposure, transaction exposure, and translation exposure.
- Recommend to investors whether they should buy or sell futures or options in that currency.
Homework Answer on Evolution of the Philippine Monetary System
The Philippine Central bank was founded in June 1948. It was established for maintaining financial stability, preservation of the value in addition to the convertibility of the Peso and developing the fiscal, credit and exchange terms suitable for the economic development of the country. In performing its operations, the central bank was responsible for the supervision of the commercial depository structure and the management of the nation’s foreign currency structure.
From the time it started its functions, the central bank has been intervening extensively in the financial life of the nation. It has been implementing the benefit rates on bank deposits as well as loans (Broad, 1990).The monetary policies that were introduced by the Philippine government initially resulted in the huge intermediation margins, the diversity between lending and borrowing. For instance in the 1988, the rates of loans averaged 16.8%, while the rates on savings deposits were approximately 4%.
The Philippines central bank customarily retained moderately elevated reserve requests. Currency supply progress has been greatly variable, increasing during the economic and political havoc and then contracted when the Philippines attempted to meet IMF requirements. The Philippines initially took on inflation targeting as the structure for fiscal guidelines, which happened in beginning of 2002. Their inflation target is determined through what is known as the Consumer Price Index (CPI) and it has been set to be 3.5%, with 1% lenience level (Eichengreen & Razo‐Garcia, 2006).