Introduction to

Monetay
By: Kyla Lenore Zayco
Policy
Monetary policy is a blunt form that surely influences
 the classification of income and wealth, even
though whether the net effect search
out increase or weaken inequality is turbid.

-Kyla Z.
 Monetary Policy
The manipulation and control of money supply and even credit
conditions in the economy is called monetary policy. It
involves management of money supply and interest rates. This
is strictly implemented when financial crisis occurs. The
central bank of the country is doing this responsibility in order
to achieve the goals of the government like to stabilize prices
and wages, to maintain a stable economy, and to achieve
economic growth.
 Financial Institutions
Financial institutions are the ones
implementing the monetary policy. Its
function is to have a balanced economy,
which means investments and savings are
equal. These institutions are responsible for
the smooth transfer of money within the
economy, stability of money supply, and
control of inflation. Financial institutions
are classified as banking and non-banking,
according to their functions and objectives.
 Bank
A bank is an institution for lending,
borrowing, issuing, or managing money. It
receives the money deposited by people
including the government. The businessmen
borrow money deposited in the bank for
capital. It is often said that for economic
progress, people should save money in the
bank. Banks are classified based on their
objectives and functions.
Commercial
Presentations are communication tools
Banks Rural
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Thrift Special
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Trust Companies International

Trust companies are banks that take A financial institution that provides
care of the properties and funds of people financial services, such as payment
like minors who have no power to care for accounts and credit facilities, to
their properties. They also manage funds and foreign customers.
properties of church and other charitable
institutions.
1. Commercial Banks
The largest among the banks in terms
of functions. Commercial banks are those that
accept all kinds of deposits including savings
deposit, time deposits and give out loans for
business, housing, and automobile..
 2. Rural Banks
Rural bank aims to help farmers to have
capital. It needs a capital of two million pesos
to be established. Rural banks were created
through R. A. No. 720, known as the Rural
Banks
Act. The paid-up capital should not be less
than
2 million for savings and mortgage banks.
 3. Thrift Banks
Thrift bank is also known as a savings
bank. It encourages people to save portion
of their income in banks. This is the most
common kind of bank. Some of the types of
thrift banks are the following:
Saving and Loan Association
Thrift Banks
Savings and loan association
Private Development Bank
Organized under the provision of
gives loan and accepts deposit from
Republic Act 4093, also known as the
members.
Private Development Banks Act, private
The interests earned from the
development bank accepts deposit that
loan are given back to the members as
can be used by small and medium-scale
dividend.
businessmen. The Development Bank
of the Philippines supports this type of
Saving and Mortgage Bank bank..
Savings and Mortgage Bank
encourages people to save and at the
same time accepts pawned items as
collateral for loans.
4. Trust Companies
Trust companies are banks that take
care of the properties and funds of people
like minors who have no power to care for
their properties. They also manage funds and
properties of church and other charitable
institutions.
5. Special Banks
There are also banksthatwere organized
with specific functions and objectives. The
government has to establish special banks
to promote and implement its programs for
socio-economic development of the country.
It includes banks that will look after the
welfare of small farmers and businessmen,
and Muslims.
6. International Banks
There are also banks that were organized
with specific functions and objectives. The
government has to establish special banks
to promote and implement its programs for
socio-economic development of the country.
It includes banks that will look after the
welfare of small farmers and businessmen,
and Muslims.
 International Banks
Asian Development Bank (ADB)
International Monetary Fund (IMF)
Development Bank Of the Philippines
Al-Amanah Islamic Investment Bank of
The Philippines (AAIIBP)
World Bank
 Non-Banking Institutions
These non-bank financial institutions
provide services that are not necessarily
appropriate for banks, serve as competitors
to banks, and specialize in particular
sectors or groups.
1. Government Service Insurance System (SSS)
Created to safeguard the interest
and welfare of all government employees.
Members receive various services from GSIS
such as insurances and financial help through
loans and pension for the retired members.
It provides dividend to all members because
the GSIS uses their contributions in different
investment ventures.
2. Social Security System
It was created through Republic Act
(SSS)
No. 1992 which aims to provide support to
all members members that come fromthe
private sectors. All employees from the
private sectors pay their contributions to
SSS to receive the same benefits as to those
of the government employees. SSS accepts
voluntary members like farmers, household
helpers, and self-employed individuals. OFWs
are also members of SSS.
 3. Pag-IBIG
It was established to help the members
have their own houses. It receives contributions
from its members from government, private
employees, and Overseas Filipino Workers
(OFWs). It also provides housing and calamity
loans to its members.
4. National Home Mortgage Finance Corporation (NHMFC)

It was created through Presidential Decree

No. 1267 on December 21, 1977, which
aims to
help individuals to own a house and lot
through
modes of installment.
 5. Pawnshop
A pawnshop is one of the business
ventures that serve as middleman to all
individuals who need financial help. It
accepts
anything of value as collateral to their loan.
 Central
All banks have a role to perform in Bank
improving our economy. However, all the
functions must be controlled by the Central
Bank. The Central Bank is the bank of banks. It
is a central institution designed to bring about
unified control of the financial system of the
country. It is a public institution that operates
primarily for service and not for profit.
 Bangko Sentral ng Pilipinas
The Central Bank of the Philippines was
created through RA No. 265 on June 3, 1949.
It was patterned after the Central Banks of
Guatemala and Paraguay, which at that time,
had similar economic status as the Philippines.
It is the country’s central monetary authority.
The first governor was Miguel Cuaderno
who started the exchange control program.
He never allowed himself to be dictated by
the International Monetary Fund (IMF).
The Bangko Sentral
1. Safe keeper ng
andPilipinas
controller has several functions:
of foreign
currencies, gold, and payments for
foreign and local debts;

2. Issues peso bills in exchange for foreign

currencies and regulates the money
supply in the economy;

3. Controls and decides whether to lend or

not to lend money to other banks;

4. Safe depository of public funds;

The Bangko Sentral ng Pilipinas has several
5. Acts as clearing house that monitors if functions:
checks issued by the banks with each
other have funds;

6. Acts as rediscounting window by

rediscounting the commercial papers of
the banks and providing loans to them;
And

7. Imposes the reserve requirement

system among commercial banks.
Different ways in
1. Discount controlling
Rate the supply
– It represents the of money:
interest rate charged by BSP to the bank
debtor.

The BSP extends discounts, loans and

advances to banking institutions in order to
influence the volume of credit in the financial
system. The rediscounting facility allows a
financial institution to borrow money from
the BSP using promissory notes and other
loan papers of its borrowers as collateral.
Different ways in controlling the supply of money:
2. Reserve Requirement – The percentage
of deposits to be kept in the banks as reserves
depends on the current policy of the BSP. If
it wants to expand money it may require as
low as 10 percent; if it wants to tighten the
money supply, it can increase the reserve
requirement to as high as 20 percent or
more. Changes in reserve requirements have
a significant effect on money supply in the
banking system.
Different ways in controlling the supply of money:
3. Open Market Operation – To decrease
the money in circulation, the BSP sells bonds
of the government known as treasury bills. It
represents the debt of the government. The
government will pay the T-bill with interest
after the maturity period. This is to encourage
people to buy those treasury bills.
Different ways in controlling the supply of money:
4. Fiat Money Authority – Fiat Money
Authority isthe sole power of the BSP to mint
money and require it to be honored in any
transactions. The BSP has the exclusive power
to issue the national currency. All notes and
coins issued by the BSP are fully guaranteed
by the Government and are considered legal
tender for all private and public debts.
Different ways in controlling the supply of money:

5. Moral Suasion – Moral suasion is to

encourage the different banks to control the
supply of money in the circulation.
 Money as a Medium Of Exchange
Money is anything used as a medium
of exchange. It is an instrument used by
individuals to buy products and services..
We work hard to earn money. Economic
transactions have become faster with the use
of money.
 Evolution of Philippine
When the Central Bank was established in Money
1949, it issued paper money in different
denominations 1, 2, 5, 10, 20, 50; and 100
peso bills that showed the pictures of our
heroes, like Jose Rizal in the 1 bill, Andres
Bonifacio in the 5 bill, Apolinario Mabini in
the 10 bill, Manuel L. Quezon in the 20 bill,
Sergio Osmeña in the 50 bill, and Manuel
Roxas in the 100.
 Evolution of Philippine Money
Before the coming of the colonizers in
our country, our forefathers used a different
form money which underwent a long process
of transformation.

The first Spanish coin, which was first

used in the entire island, bore the face of
Queen Isabela of Spain.
The first coin in our country which
Dr. Gilbert Perez discovered was called the
Penniform gold barter ring.
 Evolution of Philippine
The bronze coin with little value known
Money
as hilis kalamay because of its unconventional
shape was also used during the Spanish period.
The Philippine Coinage Act of 1902
approved the use of gold exchange standard in
our country.
 Evolution of Philippine Money
It was first minted in Mexico during the
reign of Philip V and was circulated for forty
years.
During that time, money had no value, that’s
why the money then was called Mickey Mouse. Currently, we
have the 200, 500, and 1000-peso paper bills
in circulation.
It issued the first paper money called Pesos
Fuertes. We now have five-peso, which
bore the picture of Emilio Aguinaldo and ten peso coins that bear the pictures
of Andres
Bonifacio and Apolinario Mabini.
 M onetary Standards
Monetary standard is a particular kind
of standard money used in the country. It is
the type money issued in circulation by the
government. The printing and minting of
money is based on the monetary standard
that the government adopts.
There are two kinds of monetary
standards: commodity standard and noncommodity standard.
 Monometallism and
A country that uses one metal like gold
Bimetallism
or silver as monetary standard was under the
monometallic standard. If it uses two like gold
and silver as monetary standard it falls under
the bimetallic. This kind of standard existed
in England for several years. The weakness of
bimetallic standard was exposed by the
Gresham’s Law, which was explained
by Sir Thomas Gresham.
 Monometallism and Bimetallism
According to him,
if the two kinds of money in circulation have
the same value like gold and silver, people
will tend to keep the money with high metal
value. The money with lower metal value will
remain in circulation while the others will be
kept by the people.
Undera.the commodity
Gold Standard
standard are the following:
A country is under this standard when
the money in circulation or the standard
money is redeemed and has equivalent in
gold. The United States use this standard
through the gold coin standard and the gold
bullion standard. Money has a definite weight
in terms of gold bullion. However, the gold
bullion was used as reserves of the government
and was not allowed to circulate by the United
States government.
Under the commodity standard are the following:
b. Silver Standard
This standard consists of two types: the
silver coin standard and silver bullion standard.
The monetary unit under the two types is
redeemable and has an equivalent in silver. The
gold standard and the silver standard have the
same characteristics. The only difference is the
metal used in redeeming the money, which is
either gold or silver.
 Non-commodity
The government opted for an alternative
Standard
in using monetary standard because of the
high value and cost of metal.

Paper Standard
It is the issuance of paper money in
circulation regardless of metal equivalent.
Forms of Money
1. Commodity Money
Our forefathers used anything as a
medium of exchange. They used different
products such as rice, corn clothing, necklace,
bracelet, and other valuables to buy and get
the products they need. Later on, they valued
the metals like gold, silver, and bronze as a
medium of exchange.
Forms of Money
2. Fiat Money
The money that circulated and was used
during the Japanese period had no intrinsic
value. This is known as fiat money. This kind of
money can only be accepted if it is considered
as a legal tender. Legal tender means the
government guarantees the use of the money
in all kinds of transactions, like payment of debt
and in buying goods and services.
 Forms
3. Credit Money
of Money
Credit money refers to any credit
instrument accepted as payments for
products and services consumed by an
individual. It is also used as payment for any
debt and obligations
Forms of Money
3. Credit Money
Credit money refers to any credit
instrument accepted as payments for
products and services consumed by an
individual. It is also used as payment for any
debt and obligations

4. Plastic Money
ATM cards and credit cards belong to this
form of money.
 Characteristics of Money
1. Durability
Good money is not easily torn and
destroyed. The materials used in minting and
printing the money is not commonly used.
Paper money can last for five years while the
coins can last for ten years.
 Characteristics of Money
2. Easy to Recognize
With the use of special materials in
minting and printing the money, it can be easily
identified and recognized by the people against
the counterfeit money. It can be identified
through color, shape, and design.
 Characteristics of Money
2. Easy to Recognize
With the use of special materials in
minting and printing the money, it can be easily
identified and recognized by the people against
the counterfeit money. It can be identified
through color, shape, and design.
 Characteristics of Money
3. Acceptability
Money as an instrument of exchange is
widely accepted by everybody in all economic
transactions within the country that uses the
money.

4. Stability
The value of money is not easily
affected by the fluctuation of prices in a short
period of time. The supply of money should
be monitored and managed according to the
needs of the economy to make it stable.
 Characteristics of Money
3. Acceptability
Money as an instrument of exchange is
widely accepted by everybody in all economic
transactions within the country that uses the
money.

4. Stability
The value of money is not easily
affected by the fluctuation of prices in a short
period of time. The supply of money should
be monitored and managed according to the
needs of the economy to make it stable.
 Characteristics of Money
5. Divisibility
Money is divided into different denominations with its real
value not affected. It is Characteristics of Money being done to
make the transactions and exchange of goods and services easy.
It is the reason why we have 5 cents, 25 cents, 5-peso coins,
10-peso coins, 100-peso bill, and many denominations for the
currency
6. Portability Characteristics of Money
Money can be carried or brought anywhere due to its portability. A
huge amount of money can be placed inside a small bag or even
envelopes for ease and convenience of carrying it.

7. Flexibility
The increase and decrease of money
depends on the needs of the economy. If the
inflation is high, then the money in circulation is lesser
6. Portability Characteristics of Money
Money can be carried or brought anywhere due to its portability. A
huge amount of money can be placed inside a small bag or even
envelopes for ease and convenience of carrying it.

7. Flexibility
The increase and decrease of money
depends on the needs of the economy. If the
inflation is high, then the money in circulation is lesser
 Characteristics of Money
8. Uniformity
Every denomination of the currency has
a particular color, shape, weight and design.
All one-peso coins have similar features like
color, design, and weight. This is true with
other money like the 20-peso bill to avoid
confusion among people.
These are: Functions of Money
1. Medium of exchange
When people learned how to use
money, they acquired products and services
through payments.
It eliminated the existence of barter
transactions. All transactions in the economy
are done with the use of money as a medium
of exchange for all products.
 Functions
2. Store of Value of Money
One advantage of money is that it can
be kept and stored for a long period of time
for future use without directly affecting its
value unlike other commodities like rice,
vegetables, and other perishable goods that
cannot be stored for a long period of time
because the value of the product will be
affected.
 Functions of Money
3. Standard of Value
All commodities that use products in any
transaction are valued with a specific amount
of money to acquire the standard value. With
the use of money, it’s easy to know the value
of any product that people want to acquire,
let’s say an LCD TV is worth 75,000 while a
DVD is worth 30,000. All products can be
easily acquired when the value is expressed
in terms of money
 Functions
4. Standard of Deferred Payment
of Money
Many economic transactions today are
done using a credit card rather than cash.
Nowadays, money in our society serves as an
important instrument in credit and deferred
payment transactions, wherein goods and
services can be acquired immediately without paying
cash money.
 Functions
4. Standard of Deferred Payment
of Money
Many economic transactions today are
done using a credit card rather than cash.
Nowadays, money in our society serves as an
important instrument in credit and deferred
payment transactions, wherein goods and
services can be acquired immediately without paying
cash money.
Thank You
for listening!