How the Central Bank of the Philippines adjust money supply?

Question

How the Central Bank of the Philippines adjust money supply?

Answer 1

Monetary policy is the process by which a government, central bank, or monetary authority manages the money supply to achieve specific goals. Usually the goal of monetary policy is to accommodate economic growth in an environment of stable prices.

A failed monetary policy can have significant detrimental effects on an economy and the society that depends on it. These include hyperinflation, stagflation, recession, high unemployment, shortages of imported goods, inability to export goods, and even total monetary collapse and the adoption of a much less efficient barter economy.

Governments and central banks have taken both regulatory and free market approaches to monetary policy. Some of the tools used to control the money supply include:

    * changing the rate at which the government loans or borrows money

    * currency purchases or sales

    * increasing or lowering government borrowing

    * increasing or lowering government spending

    * manipulation of exchange rates

    * raising or lowering bank reserve requirements

    * regulation or prohibition of private currencies

    * taxation or tax breaks on imports or exports of capital into a country

For many years much of monetary policy was influenced by an economic theory known as monetarism. Monetarism is an economic theory which argues that management of the money supply should be the primary means of regulating economic activity. The stability of the demand for money prior to the 1980s was a key finding of Milton Friedman and Anna Schwartz supported by the work of David Laidler, and many others.

The nature of the demand for money changed during the 1980s owing to technical, institutional, and legal factors and the influence of monetarism has since decreased.