The Outstanding Roles of Financial System in the Global Economy_ Finance Tips.


Study objectives:

The role of financial system in global economy.

The role of market, meaning, types and Channel for saving and investment.

 

The roles of financial system ranges from moving loanable fund that are available to the people or areas that needs it, it facilitates the global economy so that the citizens of a country can live above poverty rates.

However, Financial System is the assembling of people, institution, laws and regulations through which securities, such as stocks, bond, Treasury bill and others are traded in order to provide financial service and determine the interest rates. Financial system plays an important role in our lives, without it we would have lived in much an uncomfortable state.

The global Economy  makes the flow of production stable, for an easy flow of payments, the standard of living of every citizens could fall flat if the loanable fund is costly or unavailable, this  shows how significant  the global Economic system and the close relationship it has with the financial system.

                                 photo credit: datadriveninvestor.com


The financial system assist a nation to ascertain the cost of credit and the available credit, which are used to purchase goods that we consume on daily basis. This flare up the fact that market also plays a role in the global economic system by helping people to exchange goods and services they need as it is made available to them. Whichever the global economic system of Nigeria economy and most of the Africa countries haven’t be in a stable state.

The role of markets in the global economic system can’t be emphasize, since it vast role are noted by every manufacturers, wholesalers, retailers and buyers. Markets stands as the main basis when it comes to allocation of resources and distribution of goods and services.

We all are familiar with the market term and how it has continued to display modern accessories and wears to ease human struggle and stimulate comfort in most suitable way.

The three types of markets that graft with the global economic system are:

1.       Factor market

2.       Product market

3.       Financial market.

In the global economic system market determines the amount and what goods to produce at a particular time, the financial system, market and global economic system are attached together so as to get a good result. The market also distribute income through buying and selling.

                         photo credit: worldfinance.com


Under the financial markets and the financial system, we have the channel for saving and investment: It is obvious that all income from the household is not consumed, some amounts are saved while some are investment for the future, as we know the nature of savings depends on what type of the units in society, but for households; savings are what is left after the household’s total consumption expenditure, and tax payment are paid, on the other hand investment is simply the acquisition of capital goods; building, equipment and the purchases of raw material for production of goods.

In all these, you have to note that these features mentioned above has to been combined before each of them could work properly.

What do you think?


Here are Functions Performed by the Global Financial System and The Financial Markets. 

 The function of global financial system are numerous, it’s part of our daily living activities and how we survive as a particular country.

We have seven outstanding functions of global financial system, there are:

1.       Credit function: Credit comprises of a loan of funds which in return the debtor promised to repay the fund in the future. The global market make out fund for finance consumptions and investment spending. Businesses, individuals, federal government, and other needs credit for an easy living and execution of duties. The business stand in for credit to stock their warehouses, buy new equipment for production, meet payroll for their employees and construct new building for business and quit a lot of other things.

 

2.       Policy function: In this era, the government has form a policy through the financial market to stabilize and control the economy of the country in order to avoid inflation , by setting standard for interest rates and available credit for citizens, they have  been able to affect borrowing and spending plans for the public, making the country comfortable for all. This policy set by the government influence the growth of jobs, production, and prices of production and consumption. As we know the risk of economic realization has been given to countries’ central banks, and other financial institution. 

 

               photo credit: vanguardngr.com

3.       Payments function: Global financial system also gives rooms for devices which are used to make payments for goods and services across countries of the world. There are many method which are used in making payment in the global financial system. These are: checking account and negotiable order of withdrawal, electronic means of payment and the use of plastic card payment.

 

4.       Liquidity function: In today’s world, money is consists mainly of deposits held in banks and is the only financial instrument possessing perfect liquidity. When the financial instrument is used to stored wealth, the global financial market provides a mean so as of converting those instrument into cash with little risk of loss. Thus the world’s financial market provide liquidity: that immediately spendable, for savers who hold financial instruments but are in need of money.

 

5.       The risk function: The financial markets across the world protects the consumers, individual, businesses and government, against risk, that they encounter through their during life activities. The financial market achieved these through providing the sales of insurance policies, when we have different types of insurance that helps to make life easier by taking care of the risk we come across daily.


 

photo credit: worldfinance.com

6.     Savings function: The global financial system provides some potential profitable, low-risk term for the public’s savings, which flows through the financial markets into investment, that’s helps to increase the production of goods and services. In not sheer, the global financial system, makes saving of fund easier for the households and business firm, through trading low-risks securities in the financial markets.

In conclusion, the functions performed by the global financial system and the financial markets are like the sands of the earth, since it has vast contribution to every countries of the world.

what do you think?

 

 

 


 

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