Cycles or fluctuations?

In recent years economic theory has moved towards the study of economic fluctuation rather than a 'business cycle' - though some economists use the phrase 'business cycle' as a convenient shorthand.

For Milton Friedman calling the business cycle a "cycle" is a misnomer, because of its non-cyclical nature. Friedman believed that for the most part, excluding very large supply shocks, business declines are more of a monetary phenomenon.

Rational expectations theory states that no deterministic cycle can persist because it would consistently create arbitrage opportunities. Much economic theory also holds that the economy is usually at or close to equilibrium. These views led to the formulation of the idea that observed economic fluctuations can be modeled as shocks to a system.

In the tradition of Slutsky, business cycles can be viewed as the result of stochastic shocks that on aggregate form a moving average series.

Floating exchange rate

A floating exchange rate or a flexible exchange rate is a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange market. A currency that uses a floating exchange rate is known as a floating currency. The opposite of a floating exchange rate is a fixed exchange rate.

Roles and Responsibilities

The main functions of the Bangko Sentral are:

1. Liquidity Management, by formulating and implementing monetary policy aimed at influencing money supply, consistent with its primary objective to maintain price stability,
2. Currency issue; 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,
3. Lender of last resort, by extending discounts, loans and advances to banking institutions for liquidity purposes,
4. Financial Supervision, by supervising banks and exercising regulatory powers over non-bank institutions performing quasi-banking functions,
5. Management of foreign currency reserves, by maintaining sufficient international reserves to meet any foreseeable net demands for foreign currencies in order to preserve the international stability and convertibility of the Philippine peso,
6. Determination of exchange rate policy, by determining the exchange rate policy of the Philippines. Currently, the BSP adheres to a market-oriented foreign exchange rate policy, and
7. Being the banker, financial advisor and official depository of the Government, its political subdivisions and instrumentalities and GOCCs.
8. Reasonably responsible for the faults of the people behind it get the blame of the opposition to which it is grouped.

Bangko Sentral ng Pilipinas (Central Bank of the Philippines)

The Bangko Sentral ng Pilipinas (BSP) is the Central bank of the Republic of the Philippines. It was rechartered on July 3, 1993, pursuant to the provisions of the 1987 Philippine Constitution and the New Central Bank Act of 1993. The BSP was established on January 3, 1949, as the country’s central monetary authority.

In 1900, the First Philippine Commission passed Act No. 52, which placed all banks under the Bureau of the Treasury and authorizing the Insular Treasurer to supervise and examine banks and all banking activity. In 1929, the Department of Finance, through the Bureau of Banking, took over bank supervision.