Contemporary Issues in Financial Services Essay

Contemporary Issues in Financial Services - Essay ExampleThese factors can be consumed in the present time or utilized with an aim of producing in the future. Economic activity is taken as real because real resources are utilized to come up with new products that can be bought and used. On the other hand, the pecuniary system mainly focuses on either circulating funds around to modify people buy profounds and services or assist people alter ownership of resources vital for turnout purposes. It is worth mentioning that activities of the real parsimoniousness are vital for human survival. The real economy is responsible for the toil of consumer goods, food, lighting, heating, and entertainment to mention but a few (Mankiw 2008, p.162). The role of the financial system is to facilitate the drudgery of such goods by ensuring that funds are available when needed. Therefore, the structure of the financial system comes to the fore since it would twirl alternative financing window s. These institutions provide an avenue through which large or small manufacturing sectors can penetration finance, which would boost production. The role undertaken by the financial system in coordinating economic activities, which includes the cost of finance, paid investment outlets, and availability of investment funds, has a direct relationship with the structure of the financial system. ... However, it appears that most economists are in agreement that a link exists between the financial system and the real economy (Burton & brownish 2009, p317). The structure and role of the financial system The financial system is made of financial institutions and financial markets. Examples of the financial institutions include the banking system (banking institutions and the central bank), and non-bank financial institutions (insurance and pension funds). The financial markets are made of foreign exchange markets and money markets, capital markets, which include bond markets, private d ebt securities, public debt securities, and equity markets, and the derivatives markets. The current literature create has not fully addressed the issue of the role and structure of the financial system essential in facilitating and sustaining growth. There are two general agreements in relation to the role and structure of financial systems first, countries with good working banks and financial markets can increase their growth pace. Secondly, better functioning financial systems reduce the tear on external financing, which hinder firm and industrial expansion (Mordi 2010, p.8). Role played by the financial sector in the economy A crucial role that the financial sector plays within an economy in the facilitation of growth is the reduction of enforcement, information, and transaction costs. This function is achieved through a number of unique functions performed by the financial sector. Therefore, the financial sector has some basic functions that include provision of efficient mo des of payment for the self-colored economy, and intermediary between lenders and borrowers. The