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Ano ba ang ibig sabihin ng fixed exchange rate

Glossary of Terms Monetary Policy - Glossary and Abbreviations Base Money BM — the sum of the reserve money RMreserve-eligible government securities, liquidity reserves and reserve deficiency of banks. This standard basket contains hundreds of consumption items such as food products, clothing, water and electricity whose price movements are monitored to determine the overall change in the CPI, or the level of inflation See also Inflation Rate.

Demand-Pull Factors of Inflation — pressures on inflation caused by relatively higher demand compared to the available supply of goods and services. Usually, when people, business or the government receive more income, realize capital gains or obtain easier access to credits, the overall demand for goods and services may increase.

This would lead to increased prices, assuming the supply of goods and services is not able to adjust quickly enough to meet the higher demand. In addition, supply shocks in the economy that, either increase the costs of raw materials or curtail supply or both could result in second-round effects that, in turn, may lead to higher demand-side price pressures. Higher oil and agricultural commodity prices, for instance, may eventually affect the price- and wage-setting behavior of economic agents, which could then lead to second-round price pressures from the demand side.

Explanation Clauses - the predefined set of acceptable ano ba ang ibig sabihin ng fixed exchange rate under which an inflation targeting central bank may fail to achieve its inflation target. Such circumstances recognize the fact that there are limits to the effectiveness of monetary policy and that deviations from the inflation target may sometimes occur because of factors beyond the control of the central bank. Under the inflation targeting framework of the BSP, these circumstances include price pressures arising from: Inflation Rate - the rate of change in the weighted average prices of goods and services typically purchased by consumers.

The weights of the goods and services are based on their corresponding share to the Consumer Price Index CPI basket, i. Inflation is typically defined as the annual percentage change in the CPI.

It indicates how fast or slow the CPI increases or decreases. Headline Inflation — the rate of change in the weighted average prices of all goods and services in the CPI basket.

Exchange-rate regime

Core Inflation — An alternative measure of inflation that eliminates transitory effects on the CPI, core inflation removes certain components of the CPI basket that are subject to volatile price movements, such as food and energy, and other items affected by supply side factors, the price changes from which are not within the control of monetary policy.

Trimmed Mean - represents the average inflation of the weighted middle 70 percent in a lowest-to-highest ranking of year-on-year inflation rates for all CPI components. Weighted Median - represents the middle inflation corresponding to a cumulative CPI weight of 50 percent in a lowest-to-highest ranking of year-on-year inflation rates.

Inflation Expectations — the perceived rate of change, trends and movements of the prices of goods and services in the economy. Measures of inflation expectations include survey-based consumer and business expectations of inflation and inflation forecasts of private analysts, among others.

Inflation Target — level of inflation which the BSP aims to achieve over a given period under the inflation targeting framework. Inflation Targeting IT — a framework for monetary policy that focuses mainly on achieving price stability as the ultimate objective of monetary policy.

The IT approach entails the announcement of an explicit inflation target that the monetary authority promises to achieve over a policy horizon of two years. Interest Rates — the cost of borrowing money or the amount paid for lending money expressed as a percentage of the principal.

Interest Rate Differential - the difference or margin between interest rates such as the difference between domestic and foreign interest rates. M1 or Narrow Money — consists of currency in circulation or currency outside depository corporations and peso demand deposits.

M2 or Broad Money — consists of M1 plus peso savings and time deposits. M3 or Broad Money Liabilities — consists of M2 plus peso deposit substitutes, such as promissory notes and commercial papers i. M4 - consists of M3 plus transferable and other deposits in foreign currency. Monetary Aggregate Targeting ano ba ang ibig sabihin ng fixed exchange rate an approach to monetary policy whereby the central bank adjusts its monetary policy instruments to control the level of monetary aggregates.

This approach is based on the assumption that there is a stable and predictable relationship between money on the one hand, and output and inflation on the other hand. This means that the reaction of inflation to changes in money supply is stable over time and is, therefore, predictable.

The approach assumes that the monetary authority is able to determine the level of money supply that is needed given the desired level of inflation that is consistent with the economy's growth objective.

Monetary Policy

In effect, the monetary authority influences inflation indirectly by targeting the money supply. Monetary Policy — measures or actions taken by the central bank to influence the general price level and the level of liquidity in the economy. Monetary policy actions of the BSP are aimed at influencing the timing, cost and availability of money and credit, as well as other financial factors, for the main objective of stabilizing the price level. Examples are the lowering of policy interest rates and the reduction in reserve requirements.

Expansionary monetary policy tends to encourage economic activity as more funds are made available for lending by banks. This, in turn, increases aggregate demand which could eventually fuel inflation pressures in the domestic economy. Examples of this are increases in policy interest rates and reserve requirements. Contractionary monetary policy tends to limit economic activity as less funds are made available for lending by banks.

This, in turn, lowers aggregate demand which could eventually temper inflation pressures in the domestic economy. Liquidity reserves - refers to the option given to banks in complying with the reserve requirement, whereby bonds deposited in the reserve deposit account RDA facility are considered as compliance with the reserve requirement.

  • A few hours after the Marcos party landed in Honolulu, their luggage arrived — 300 crates on board a C-141 cargo jet;
  • The RDA, which eventually replaced government securities as a form of compliance with the liquidity reserves, allows banks to keep a portion of their reserves in the form of a three-month term deposit in the RDA maintained with the BSP;
  • Ray Canterbery's delayed peg;
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Moral Suasion — the influence which the central bank exercises to induce or convince banks to conduct operations in a manner that would contribute to the attainment of monetary goals but not necessarily support the profit-maximizing objectives of the banks.

The liquidity reserve requirement consisted of market-yielding government securities purchased directly from the BSP. The RDA, which eventually replaced government securities as a form of compliance with the liquidity reserves, allows banks to keep a portion of their reserves in the form of a three-month term deposit in the RDA maintained with the BSP.

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Pre-termination of RDAs is allowed, subject to a reduction in applicable interest rates, as prescribed by the Treasury Department. These deposits were introduced in November 1998 to expand the BSP's toolkit for liquidity management. Supply Shocks to Inflation — pressures on inflation resulting from shortages in supply and increases in the cost of production without a corresponding expansion in output. Examples of these are bad weather, natural calamities and disasters; wage increases not matched by higher productivity of labor; hikes in international oil prices; increases in prices of imported raw materials; and hikes in rental rates.

These tend to limit or decrease supply, and, assuming no decline in demand for goods and services, push prices up. Conversely, an oversupply of commodities tends to induce the opposite effect on prices.

Transmission Mechanism of Monetary Policy — process by which monetary policy actions affect economic and financial variables. This mechanism describes the various channels, as well as the length of time, through which monetary policy actions affect the real economy, particularly inflation and output. Treasury Bill Rate — the yield on short-term debt instruments issued by the National Government NG the primary market for the purpose of generating funds.

Treasury bills come in maturities of 91, 182 and 364 day ------------ 1 Liquidity reserves now take the form of deposits with RDA, which in turn is already counted as part of Reserve Money.