Why are financial markets important to the health of the economy? A financial market is a market where people and organization can trade financial securities and commodities at prices according to the supply and demand. Example of securities are stocks and bonds, and commodities include properties or valuable assets. A market holds interested buyers and sellers, including households, firms, and government agencies, in one place.
Financial markets helps the raising of capital, the transfer of risk, determination of price, global transactions with integration of financial markets, the transfer of liquidity, and for international trade purposes. One of the important catalyst for the accelerated development of an economy is the existence of a dynamic financial market. A financial market helps the economy in the following manner. Firstly, mobilization of savings of the public. Funds obtained from the savers such as household individuals, business firms, public and government is used for investment to obtain profit that helps generates to the economic growth.Next is for national growth. A financial market contributed to a nations growth by ensuring flow of surplus funds to deficit units.
Financial markets Essay Example
Flow of funds for productive purposed is also made possible. Thirdly is for entrepreneurship growth. this is because financial market contribute to the development of the entrepreneurial sector by making available the necessary financial resources. Fourth is liquidity. Financial markets are important because they allow economic growth by offering liquidity, and this liquidity allows markets to get bigger because it allows demand to be expressed very fluidly and without a very large capital gain.