10 Key Facts About International Financial Markets

1

10 Key Facts ABOUT

International Financial Markets

10 Key Facts About International Financial Markets

1

The global financial system

is vast and varied; it consists

of many different types

of financial institutions, as

well as financial markets

in stocks, bonds,

commodities, and

derivatives.

10 Key Facts About International Financial Markets

2

The global financial system promotes economic growth by:• Creating money and money-like claims

• Facilitating specialization and promoting trade

• Facilitating risk management

• Mobilizing resources globally

• Obtaining information

• Increasing the set of available opportunities

10 Key Facts About International Financial Markets

3

The global financial system is

highly interconnected.

This interconnectedness

increases its complexity and

the need for international

harmonization of regulation.

10 Key Facts About International Financial Markets

4

Firms use the global financial

markets to raise capital. The depth and liquidity of

the global financial markets

help companies reduce their

capital costs, improve access to

financing, invest more, and grow.

10 Key Facts About International Financial Markets

5

Financial architecture

refers to the composition of a

country’s financial system, in

particular whether it is

bank-dominated or

market-dominated.

10 Key Facts About International Financial Markets

6

The global financial system

promotes global trade through financing

mechanisms outside the banking

system, such as trade credit.

10 Key Facts About International Financial Markets

7

Large projects, including those for

infrastructure, are often financed

through private-public partnerships involving

project financing.

10 Key Facts About International Financial Markets

8

Banks as well as financial markets are regulated, and in both cases

regulators face tensions in enforcing regulations that pull in opposite directions.

10 Key Facts About International Financial Markets

9

Bank regulation has multiple

goals, and it is being increasingly

harmonized, but the danger is

that regulation may go too far.

10 Key Facts About International Financial Markets

10

Market-based financing, commonly know

as shadow banking—financial

intermediaries other than

commercial banks (e.g., mutual

funds, investment banks, and

hedge funds)—is growing more

rapidly than traditional banking.

Conclusion:The global financial system is vast and global flows within

this system have an enormous effect on the real economies

of different countries; that is, on GDP, economic growth, and

the well-being of individuals.

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