It’s Bangko Sentral, not Central Bank
The name of our central monetary authority since 1993, Bangko Sentral ng Pilipinas (BSP), is not merely a Filipino translation of the old Central Bank of the Philippines (CBP), established in 1949. It is also a good reminder that the latter went literally bankrupt during Ferdinand Marcos’ time, which ended with two years of hyperinflation, and the record high 74 percent of families rating themselves as poor. The CBP had been fudging its international reserves figures, and taking orders from a Marcos crony based abroad.
Just a week ago there was an excellent transition in the BSP governorship from esteemed two-termer Amando M. Tetangco Jr. to career man Nestor A. Espenilla Jr. President Duterte truly deserves praise for this nonpolitical move.
But former President Benigno Aquino III likewise deserves credit for his nonpolitical reappointment in 2011 of Mr. Tetangco, under whose watch there was a remarkable reduction of inflation, and hence of economic deprivation (see “Poverty has dropped since 2014,” 1/21/17, and “The good news on hunger,” 1/28/17).
Now it is up to Governor Espenilla to maintain the conservative management by which the BSP managed to control inflation. What is needed in monetary policy is continuity, rather than change. I say this as a rare economics PhD from the University of Chicago who was not focused on monetary economics.
Like all my UC classmates, one of my favorite professors was Milton Friedman, the great monetarist, and an excellent teacher. But unlike most of them I did not go to UC to study Money as a special field. (In Chicago parlance, the term for macroeconomics is Money; the term for microeconomics is Price Theory.) Instead, my fields were agricultural economics, which was my assignment from the UP School of Economics, my employer, and econometrics, which I chose myself.
What I learned the most from Friedman was not Money. His books that influenced me were “Capitalism and Freedom” and “Free to Choose,” rather than the massive “A Monetary History of the United States, 1867-1960.” His values and ideas are very basic to the Foundation for Economic Freedom, of which I am a cofounder.
The mandate of any central monetary authority is primarily to secure price stability rather than to promote economic growth. The first speech of Governor Espenilla duly noted that “growth could truly be meaningful only if it would be inclusive, creating jobs and improving the people’s welfare.”
This is precisely where price stability comes in, since reducing inflation is much more important to stemming poverty and hunger than accelerating the GNP, according to econometric modelling done at the UP School of Statistics, using the very long series of quarterly SWS surveys, which the BSP has the capacity to validate for itself.
I know that the BSP has its own quarterly econometric model, incorporating the money supply, inflation, interest rate, employment, GNP, and anything else it needs to forecast. The BSP model is of course confidential, but it does not include poverty, hunger and similar measures of welfare as far as I know.
The BSP is most welcome to incorporate SWS variables in its econometric model. If it feels more comfortable with its own data, it could get such data easily by expanding the questionnaire of the BSP quarterly Consumer Expectations Survey—the latest was on April 1-12, 2017, on a national sample of 5,375 households, which is much more than adequate. Then let’s compare survey findings.
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