Financial Markets

Financial markets play a major role in economic growth by transferring funds from savers to borrowers in an efficient way. In business transactions, one of the parties having better information than the other could lead to asymmetrical information issues and unequal distribution of financial resources. By resolving the information asymmetry problem affecting the financial system, a balance is therefore established between those business companies with sufficient funds to utilize for investment and those companies that are in need of funds.

Based on the concept of the structural approach, the corresponding financial system of a particular economy is composed of three major components: (1) financial markets, (2) intermediaries or institutions that support financing, and (3) the regulators of financing. Every component of the financial system plays a ...