1. BSP Control Instruments in Monetary Policy

2. Monetary Policy Instruments
the various instruments used by the BSP to achieve the desired level of money supply
(a) raising/reducing the BSP's policy interest rates;
(b) increasing/decreasing the reserve requirement;

3. (c) encouraging/discouraging deposits in the special deposit account (SDA) facility by banks and trust entities of BSP-supervised financial institutions;
(d) increasing/decreasing its rediscount rate on loans extended to banking institutions on a short- term basis against eligible collaterals of banks’ borrowers
(e) outright sales/purchases of the BSP’s holdings of government securities.

4. Expansionary Policy or Easy Monetary Policy
monetary policy setting that intends to increase the level of liquidity/money supply in the economy and which could also result in a relatively higher inflation path for the economy.
Expansionary monetary policy tends to encourage economic activity as more funds are made available for lending by banks.

5. Contractionary Policy or Tight Money Policy
monetary policy setting that intends to decrease the level of liquidity/money supply in the economy and which could also result in a relatively lower inflation path for the economy.
Contractionary monetary policy tends to limit economic activity as less funds are made available for lending by banks.

6. Money Supply
Money supply is the entire stock of currency and other liquid instruments circulating in a country's economy as of a particular time.
Also referred to as money stock, money supply includes safe assets, such as cash, coins, and balances held in checking and savings account that businesses and individuals can use to make payments or hold as short-term investments.

7. Composition of Money Supply
The Bangko Sentral ng Pilipinas (BSP) defines money on the basis of its components and there are four measures, namely:
M1 / narrow money
M2 / broad money
M3 / total domestic liquidity M4

8. Composition of Money Supply
M1 / Narrow Money
Currency : coins and paper money
Demand deposits
M2 / Broad Money
Quasi money deposit : Savings deposits and Time deposits
M3 / Total Domestic Liquidity
Deposits substitutes : promissory notes and commercial paper M4
Currency deposits of non – bank residents

9. Quasi – Money
Quasi - money is an economics term describing non-cash assets that are highly liquid, such as bank deposits, certificates of deposit (CDs) and treasury bills.
 Near money refers to assets that can be quickly converted into cash. 
the sum of savings and time deposits

10. Deposit Substitutes
Defined as an alternative form of obtaining funds from the public, other than deposits, through the issuance, endorsement, or acceptance of debt instruments for the borrower’s own account, for the purpose of relending or purchasing of receivables and other obligations.

11. Traditional Objectives of Monetary Policy
The primary objective of BSP's monetary policy is to promote a low and stable inflation conducive to a balanced and sustainable economic growth. The adoption of inflation targeting framework for monetary policy in January 2002 is aimed at achieving this objective.
The monetary policy in developed economies has to serve the function of stabilization and maintaining proper equilibrium in the economic system. 

12. Objectives: Neutrality of money Stability of exchange rates
Price stability
Full Employment
Economic Growth
Equilibrium in the Balance of Payments.

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