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Giving the BSP an Extra Mop : A Response to Short-Term Capital Inflows

Author

Listed:
  • Raul V. Fabella

    (UP School of Economics, Diliman, Quezon City)

  • Fidelina N. Carlos

    (UP School of Economics, Diliman, Quezon City)

  • Sarah Lynne S. Daway

    (UP School of Economics, Diliman, Quezon City)

  • Geoffrey M. Ducanes

    (UP School of Economics, Diliman, Quezon City)

Abstract

In the aftermath of the global financial crisis, the Philippine economy has experienced a surge in short-term financial inflows. Aside from their destabilizing effects on the financial system, the resulting upward pressure on the value of the peso has also given rise to concerns of a loss of competitiveness of the exports sector. In response, the Bangko Sentral ng Pilipinas (BSP) has intervened in the forex market. This, however, has led to costly “mopping up” activities in the face of the BSP’s commitment to inflation targeting: the BSP is now highly leveraged and in need of new “policy mops. ”This policy note discusses the alternative monetary policy tools that would enable the BSP to continue conducting independent monetary policy and to effectively adapt to the ever-changing landscape of the global financial system.

Suggested Citation

  • Raul V. Fabella & Fidelina N. Carlos & Sarah Lynne S. Daway & Geoffrey M. Ducanes, . "Giving the BSP an Extra Mop : A Response to Short-Term Capital Inflows," PCED Policy Notes, Philippine Center for Economic Development.
    • Handle: RePEc:phs:pcedpn:201303
    as

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    File URL: http://www.pced.gov.ph/wp-content/uploads/2014/03/Policy-Notes-3.pdf
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    References listed on IDEAS

    as
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    6. Alan S. Blinder, 2010. "Quantitative easing: entrance and exit strategies," Review, Federal Reserve Bank of St. Louis, vol. 92(Nov), pages 465-480.
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