Download The Influence of Financial Markets on Global Economies and more Schemes and Mind Maps Economics in PDF only on Docsity! The Influence of Financial Markets on Global Economies Financial markets impact the gathering of capital and the development of goods and services. These well-established markets and institutions offer financial products that close relationship with the economy. So, none of them can exist without the other. Moreover, the financial market allows exporters and importers to gain funds to tackle transactions. In addition, it will enable banks to borrow and lend to customers in different foreign currencies. Interestingly, it can assist governments in meeting their exchange requirements through the capital market. We can’t expect our economy to grow by ignoring the financial market. To see the role of financial markets in the global economy in detail and how it contributes to the economy’s growth in any country. What are Financial Markets? Financial markets are the places where investors can invest to get profit. But the case might be the opposite too. Financial markets include trade bonds or stocks, and share markets. Institutions like insurance companies and banks are also included in it. And they offer opportunities for investors to get experts in different markets or services. In addition, it can minimize risk, and financial markets and institutions both impact economic growth. Moreover, financial markets with significant capital have many trading activities and offer more liquidity for market participants. In contrast, financial markets with small capital and investment ratio offer limited trading opportunities. In addition, financial markets trade long-term and short-term money exchanges in both forms. Excitingly, some financial assets have virtual forms and secondary financial markets that offer transactions of financial support at a lower cost. 1. Ensures Balanced Growth of Economy The first role of the financial market is to strengthen and balance economic development growth. These markets provide savings to various investment channels and improve mobilization. They also increase the efficiency of using funds and increase the investment rate in different sectors of the economy. Furthermore, financial markets also channel these funds and use them productively. They focus on distributing to each industrial sector to retain and balance the growth of the economy. The major sectors include the service sector, agriculture, industrial, and other sectors that play a significant role in a country’s economy. 2. Increases Growth of Financial Infrastructure Another important aspect of the economy is the financial infrastructure that implies financial assets, markets, and mediators. These three pillars offer good support to the growth of the economy. These financial services also provide funds that work to develop infrastructure and industry facilities. Moreover, the financial markets greatly influence providing a mechanism for trading assets. These play roles as savers and investors to transmit the resources.
