Financial System And Its Impact On The Economy

2488 Words Nov 24th, 2015 10 Pages
Introduction: As the global economy has faced so many troubles these years, it is indispensable for us to figure out the composition of the financial system and the functions and roles of its components. Therefore, in this essay, we will use statistics, graphs and specific cases to analyze the complexity of the whole system and its influences and the effect of one of its most crucial elements, the banks.
Keywords: financial system, financial crisis, banks

It is very hard to give a unified and accurate definition of a financial system. In the reality, different countries and organizations own different kinds of financial systems regarding their current economic conditions and their actual financial demands. Generally speaking, the financial system is composed of financial institutions that manage the flow of money on behalf of individuals and businesses and financial markets which facilitate transactions across the world on a basis of different kinds of financial instruments. Gurusamy has made a brief summary of financial systems as comprising ‘a set of complex and closely interconnected financial institutions, markets, instruments, services, practices, and transactions’. (Gurusamy, Financial Services and Systems, 2008) This complex process assists funds transfers between lenders and borrowers, controls and transfers the financial risks and finally promotes the existence and development of the financial market. Stakeholder, one of the most important participants in…
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