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Elements in Financial Services and Markets - Case Study Example

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This paper 'Elements in Financial Services and Markets" focuses on the fact that financial markets play a regulatory role in determining the present, as well as the future conditions, that might prevail in an economy. They continue to be the most vulnerable of the major markets comprising a nation. …
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Elements in Financial Services and Markets
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Download file to see previous pages This paper tries to explore the aspects of the financial market of a nation affected due to changes in the official interest rate and the government’s budgetary position.
In general, the participants in the financial market of any economy mainly consist of the banking sector including the central bank as well as the commercial banks, non-banking financial sector, a stock market and even individuals (Mel’nikov, 1999). In fact, it is the individual activities in both domestic and international spheres, which when aggregated play a major role in driving the operations of the financial markets. The argument in support of the above fact is that the banks, as well as financial institutions, deal with private money of individuals who often respond to the changes in financial markets through mobilising their funds which might result to a further ruckus in the same. This eventually might land up the economy into a vicious circle. However, the government too cannot be excluded as a possible element responding to changes in the financial markets. Though the proportions vary by a large extent, mobilisation of both public and private money are responsible for creating differences in the financial market scenario of a nation.
Domestic interest rates play a vital role in determining the fate of the financial situation of any nation. In fact, a rise in the domestic rate of interest can influence each and every segment comprising the financial market of an economy. However, as mentioned above, the factor which acts as a pivot in this aspect is the rational individual, who predicts the future value of his assets and mobilises his finances accordingly, thus, directing the movements of the financial market in ways discussed below. In the present study, the case of a rise in the officially determined rate of interest is being taken up.
However, the fall in the rate of interest, which is exactly opposite to a rise in the same, can easily be implied through the contrast of the situation, consequences and the preventive measures being discussed below.  ...Download file to see next pages Read More
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