Financial Investing 05 – What is Financing Methods and Financial Market Participants

In this article, we will continue the financial investing series with the discussion of financing methods and financial market participants in macroeconomics.

I. Financial markets

The health and operation of the economy is affected by many components, none more important than the segment known as the financial markets. Financial markets affects the growth, prices exchange rate and distribution of wealth and income. For the economics system to function well, money must flow from the individuals who have it (the savers) to those that need it (the borrowers).

1. Direct financing

The borrower goes directly to the investor to borrow funds.

2. Indirect financing

Indirect financing uses a financial intermediary or midleman to provide the funds, such as the funds flow from savers to financial institutions and then to borrowers.

II. Financial market participantsThere are four main participants

1. The Central Bank

The Central Bank is the federal government’s bank and has the following roles in the financial market:

a) Is the lender of last resort.

b) Oversees and conducts monetary policy.

c) Preserves the value of the dollar.

2. Deposit Intermediaries

Deposit intermediaries include the following institutions:

a) Banks

b) Credit Unions

c) Mortgage and loan companies.

d) Mortgage and loan agencies.

3. Contractual savings intermediaries

Contractual savings intermediaries are in the form of the following:

a) Life insurance companies.

b) Pension funds.

c) Property and casualty insurance companies

d) Government pension plans.

4. Investment intermediaries

Investment intermediaries include:

a) Mutual funds companies,

b) Investment dealers.

c) Consumer loan companies.

d) Business finance companies.

I hope this information will help. If you want more information of the above subject, you can find this series of articles at my home page:

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Source by Kyle J. Norton