Financial Markets and Institutions

Palgrave Macmillan UK eBooks, 1997

Economic Policy, 2012

This book is about the social and cultural study of finance, of the markets and institutions used for fmancial transactions, and the trading of assets and risks. The financial system controls and manages credit; in contemporary societies, the ultimate users of real capital rely heavily on others (investors) to provide the funds with which to acquire the resources they need. Investors make the transfers of money to those seeking credit in the hope of reaping profits at later points in time; the debts the receivers of the funds incur are claims investors can make on future income and on economic output and development. Characteristically, these claims (which take the form of company shares, governments bonds, etc.) and their derivatives are marketed and traded onfinancial markets••••with the help of financial intermediaries (e.g. banks, brokerage houses, insurance companies) who package the deals, assume some of the risks, and facilitate the trading of claims and risks among market participants. The existence of such markets allows participants to sell claims and risks they no longer want, and to pursue additional profits through clever trading. Financial markets, then, are a major, if not the most important component of the credit mechanism in risk-based economies. Economists regard them as constituting an efficient mechanism that :fuIfi11s vital functions 01: and for, the financial system: for instance, they pool and transfer wealth for capital use, decrease the costs of finance (through the elimination of banks as direct lenders), and spread and control risks risk being more widely distributed when credit is obtained in financial markets through the splitting of shares and through derivative products that can be used for hedging risky investments (e.g. Merton and Bodie 1995: 4f, 13-15). In contemporary Westem societies, financial activities are a defining characteristic not only of the corporate economy, but also of politics, the welfure and social security system, and general culture. For example, the corporate economy has long depended on credit to finance production and investments. A Robinson Crusoe with nothing to invest could not hope to produce much. He would first have to invest his own time and labor in order to build the rudiments of a productive capital structure (Shapiro 1985: 77). As Susan Strange argues (1994: 30), if we had had to wait for profits to be accumulated there would have been none of the economic growth of the past decades in industry and agriculture. The state has long needed credit and borrowed vast amounts of money. From the seventeenth century onward, states systematically financed costly military interventions by issuing debt (government First publ.

2014

This dissertation examines the evolution of financial sectors and provides an analysis of the linkages among finance, the real economy, and the social structures in which they are embedded in the context of the evolution of financial sectors. It analyzes the social and economic consequences of an increasingly complex, financialized economy.

Policy Research Working Papers, 2008

Principles of Financial Regulation, 2016