Summary of financial markets and institutions

1. Activities in financial markets have direct effects on individuals’ wealth, the behavior of businesses, and the efficiency of our economy. Three financial markets deserve particular attention: the bond market (where interest rates are determined), the stock market (which has a major effect on people’s wealth and on firms’ investment decisions), and the foreign exchange market (because fluctuations in the foreign exchange rate have major consequences for the U.S. economy).
2. Because monetary policy affects interest rates, inflation, and business cycles, all of which have an important impact on financial markets and institutions, we need to understand how monetary policy is conducted by central banks in the United States and abroad.
3. Banks and other financial institutions channel funds from people who might not put them to productive use to people who can do so and thus play a crucial role in improving the efficiency of the economy.
4. Understanding how financial institutions are managed is important because there will be many times in your life, as an individual, an employee, or the owner of a business, when you will interact with them. “The Practicing Manager” cases not only provide special analytic tools that are useful if you choose a career with a financial institution but also give you a feel for what a job as the manager of a financial institution
is all about.
5. This textbook emphasizes an analytic way of thinking by developing a unifying framework for the study of financial markets and institutions using a few basic principles. This textbook also focuses on the interaction of theoretical analysis and empirical data.

SUMMARY OF THE FINANCIAL MARKETS AND INSTITUTION.pdf (162 KB)