International Finance: Services Provided by Global Financial System

This essay provides an overview of the global financial system, highlighting its crucial role in capital accumulation and the production of goods and services. It discusses how financial markets provide signals to consumers and producers, enabling efficient fund allocation. The essay elaborates on the various services offered by the global financial system, including risk management, liquidity provision, and credit facilitation, all of which contribute to economic growth and global trade. It emphasizes the importance of a robust financial system in ensuring the smooth flow of funds between countries and enabling businesses and individuals to access credit for investment and consumption. The essay concludes by underscoring the significant influence of the global financial system on economic growth, sector development, and the overall well-being of the economy.

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INTERNATIONAL FINANCE

Finance
The financial market plays a leading role in capital accumulation and leads to the production
of goods, as well as services. The credit prices and investment returns provide a strong signal
to the consumers and producers who are known as the market participants. Such signals help
enables the funds to be directed to the consumers, businesses, investors and government that
takes an active part in borrowing of the money by establishing a connection with the ones
who value the funds to the utmost that is the ones who are ready to pay a heavy price in terms
of the interest rate (Porter & Norton, 2014). In the same manner, the presence of a financial
market of robust nature helps the market and institutions in ensuring the smooth flow of
funds between countries.
Further, when the financial markets are efficient in nature, leads to a lowering of the cost of
research and transactions in the economy. When a large basket of financial products is
available, with different risk, as well as pricing pattern, an efficient financial system leads to
allocation of different products to participants that give borrowers, as well as lenders a close
match for their needs. Further, when the individuals, government or business require funds, it
can be easily traced which financial institution or market can provide funding and the cost
can be ascertained by the borrower. Hence, this provides the investors the flexibility to
compare the financing cost to the return that is expected on the investment. In this manner,
financial markets lead to the direction of the allocation of credit in the overall economy and
hence lead to the facilitation in terms of the production of goods and services (Choi & Meek,
2011).
The global financial provides a variety of services that enable economic growth and hence
aids in the facilitation of the global trade.
Risk management – The global financial system provides risk management from the stake of
the financial market, as well as commodity prices by pooling different risks. The presence of
derivative transactions helps the bank to provide risk management (Vaitilingam, 2014). Such
services are beneficial in the manner that it helps in economic growth and aids in terms of
financial crisis.
Provision of liquidity – With the aid of strong global financial system, there has been a strong
presence of banks, as well as other financial providers that lead to the safeguard of the
businesses, as well as individuals during the needs of cash. Bank provides the function of
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Finance
demand deposits that the business or individual can withdraw at any point of time (Parrino,
Kidwell & Bates, 2012). In the same fashion, credit, as well as overdraft facility is provided
to the business. Banks, as well as financial institutions, are the major tool in the hands of the
global financial system for meeting the cash needs at any point of time.
Provision of credit – Global financial system led to the provision of credit that helps in the
economic activity. Government is in a better position to invest in projects of infrastructure by
the reduction in the cycle of tax revenue and accurate spending. In this manner business are
able to spend more than that is available with them and individuals are able to purchase home
and other essentials without the presence of the entire amount in advance (Brigham & Daves,
2012). The credit facility is entirely by dint of the global financial system
Further, the presence of the global financial system supports the export, as well as import
business as the presence of foreign exchange market ensures that the business can receive, as
well as transmit funds to different countries and in different currencies. The foreign exchange
market helps banks and other institutions to borrow, as well as lend funds in other currencies.
The presence of a global financial system has enabled banks, as well as other financial
institutions to perform in an effective manner. Such a strong function even helps the
government in meeting the requirements of the foreign exchange through the presence of
such markets (Bodie, Kane & Marcus, 2014). With the presence of this market, the financial
institutions are able to invest the funds in a prompt manner and generate profit from the
money that is lying idle by the route of investment. Therefore, the global financial system
influences the growth, as well as impact the goodwill of the economy.
Hence, it is evident that the growth and functioning of different sectors are balanced with the
aid of the global financial system. It is the presence of this system that helps the sectors with
the provision of funding and provides funds in a timely manner.
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Finance
References
Bodie, Z., Kane, A. and Marcus, A. J. (2014) Investments. McGraw Hill
Brigham, E. and Daves, P. (2012) Intermediate Financial Management. USA: Cengage
Learning.
Choi, R.D. and Meek, G.K. (2011) International accounting. Pearson .
Parrino, R., Kidwell, D. and Bates, T. (2012) Fundamentals of corporate finance. Hoboken,
Porter, G. and Norton, C. (2014) Financial Accounting: The Impact on Decision Maker.
Prentice Hall.
Vaitilingam, R. (2014) The Financial Times Guide to Using the Financial Pages. London: FT
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