Using an essay style format, discuss why might banks be considered as

Using an style format, talk of why might banks be considered as the key players in the fiscal organisation - Essay Example either of these parts are closes dependent on each other. A good financial system makes authentic that all these parts function together to make sure that the m bingley is optimally channeled in an economic system. If one part of the financial system is in conflict with the other, or if there is a distortion between the motives of the two parts of a financial system, then there are chances that the financial system pass on collapse. This is very dangerous for the entire economy, because when one part of financial system collapses, other parts as well as face the domino effect causing the economy to face serious recession and plummeting demand. Hence, it is imperative for an economy to have a stable financial system if it is to work well. (Mishkin) financial markets make it possible for community to trade securities. It is a good way of raising capital, tra nsferring risk, liquidity maintenance and trading foreign exchange. The financial markets play an important role in instilling level of confidence in the investors. They know that they bed invest now and liquidate in future when they need funds and resign them earn sideline on their money. Examples of Financial Markets can be Stock Markets, Money Markets, Forex Markets and IPOs (Lipsey and Chrystal). A good financial system usually contains financial markets as a platform that allows the trading of financial securities and instruments. Similarly, Financial Institutions consist of those organizations that allow channeling of funds and create credit in the economy. In case these are missing in a financial system, then the economy is deprived of multiplier effect and can face serious levels of unemployment and want of investment motives. Examples of Financial Markets include Banks, Building Societies, Leasing Companies etc. Financial Instruments are securities that are traded in th e Financial Markets. These include bonds, stock, money market securities and derivatives. These are again very important