The term finance is very broad and includes a number of mechanisms that consist of providing money to carry out an economic operation. Thus, it has taken a significant importance in the functioning of the economy and financial crises have severe consequences on global growth and unemployment. Let's learn more about this world.
The Financial System
The term financial system refers to an informal organization of financial markets. It is the set of entities that play a role in connection with bank credit and stock markets, including financial institutions. The transparency of this system is paramount. In addition, speculation is based essentially on the leverage effect. It allows the adequacy between supply and demand for capital. Its disruption can lead to unrest.
The Actors of Finance
At the level of financial organizations, the process comprises, inter alia, supranational banks such as the European Central Bank and the Bank for International Regulations, national central banks and commercial banks. It also includes financial corporations, retirement and pension funds, social security and provident funds, insurance companies, the Treasury and financial markets.
It should be noted that this phenomenon is not uncommon in the financial world. In fact, the financial crisis refers to a group of foreign exchange crises, banking crises and stock market crises. It is also a question of public debt crises or crises that affect a futures market or even an agricultural product market.
If a financial crisis initially only affects the financial markets, its aggravation will lead to adverse effects on the rest of the economy, resulting in an economic crisis or even a recession. These effects are generally a credit crunch and therefore a drop in investment, and a crisis in household confidence.
The world of finance includes many mechanisms such as financial crises. And institutions like banks are the actors of this system.