1.11 Types of Markets- 1.11.1 Money Market Money market is a market where the liquid securities are bought and sold in and having a maturity period of less than one year. Money market is one of the main segments of financial system of India. The main type of highly liquid marketable securities which refer to as money market instruments are treasury bills, government securities, commercial papers, certificates of deposit, call money, repurchase of assets, etc. The regulatory body of the money market is Reserve Bank of India. They control the money supply in the market by reducing the policy rates or by controlling the inflationary effects in the market. Importance of Money Market • It helps in the development of trade and industry • It also …show more content…
• Forward market- forward market is a market which deals with the foreign exchange transactions of future delivery. It only determines the forward exchange rate at which forward transactions are meant. Types of exchange rates • Fixed exchange rate system- it I the rate which does not fluctuates and gives greater certainty for the exporters and the importers. • Flexible exchange rate system- as the name suggests it is the floating exchange rate which changes freely and is determined by trading in Forex market. 1.11.4 Credit Market Credit market is a place where banks and other financial institutions provide short-term, medium-term and long-term loans to the firm and individuals having good credit worthiness in the market. 10.12 Integration of Financial Markets Integration refers to the combination of different markets so that everyone can have a non-restricted access to them. This can be done by uplifting commands on trade, for example by removing policies of control or amending the rules i.e. by non enforcement. The primary motive for such actions is to make the economy better. It even combines the markets which reduces the risk on the assets which have same returns possible across different
Monetary Policy is another policy used in Keynesianism which is a list of protocols designed to regulate the economy by setting the amount of money that is in circulation and controlled interest levels. The Federal Reserve system, also known as the central banking system in the U.S., which holds control of this policy. Monetary policy has three tools used by the Federal Reserve to enforce this policy. Reserve Requirement is the first tool that determines the lowest amount of money a bank must possess and is not able to lend out. The second way to enforce monetary policy is by using the discount rate or the interest rate a bank will charge.
The Federal Reserve The Federal Reserve uses three main tools in order to control the money supply. The first tool is open market operations. These operations consist of the buying and selling of government bonds to commercial banks and the public. Open-market operations are the most important tool that the Fed can use to influence the money supply (Brue, 2004, p. 252).
The stock market is a centralized area where buyers and sellers comes together to perform stock transaction. When one thinks of the stock market, the first thing comes to mind is Wall Street which is sometimes referred to as the New York Stock Exchange as well as the NYSE.
The Federal Reserve Board uses three monetary tools that affect macroeconomics such as unemployment, inflation, and interest rates, and control the money supply; these tools are known as discount rate, reserve requirements, and open market operations. In The Economy Today Schiller 2010 states that “Monetary Policy is the use of money and credit controls to influence macroeconomic outcomes” (p.309.) It also refers to the actions assumed by the Federal Reserve Board.
Monetary policy is the mechanism of a country’s monetary authority (usually the central bank) taking up measures to regulate the supply of money and the rates of interest. It involves controlling money in the economy to promote economic growth and stability by creating relatively stable prices and low unemployment. A monetary policy mainly deals with the supply of money, availability of money, cost of money and the rate of interest to attain a set of objectives aiming towards growth and stability of the economy. Here are some of the monetary policy tools:
According to federalreserveeducation.org, the term "monetary policy" refers to what the Federal Reserve, the nation 's central bank, does to influence the amount of money and credit in the U.S. economy, (n d). The tools used are diverse but the main ones are:
There are several factors affecting the money supply: spread between the discount rate and federal funds rate, required reserve ratio and open market operations. It is very important to understand that whenever the "DR charged by Fed is lower than the FFR charge by other banks; banks tend to borrow from the Fed.
Floating exchange rate which is also known as fluctuating exchange rate or flexible exchange rate is an exchange rate regime where its currency is determined by foreign exchange market forces such as demand and supply of that currency relative to other currencies.
To put it simply, the exchange rate is a price. As with any other market, price is determined by supply and demand. Whenever they are not equivalent, the exchange rate would change. However, the reality comes to be far more complicated.
Stubb, Alexander C.-G.: «A Categorization of Differentiated Integration»; Journal of Common Market Studies 34 (1996), pp. 283-295.
According to Hill, regional economic integration refers to "agreements among countries in a geographic region to reduce, and ultimately remove, tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other." The prevailing economic argument for regional economic integration is that it creates economic synergy by allowing each country to focus only on what it is most efficient at producing.
Vertical integration is the process in which several steps in the production and/or distribution of a product or service are controlled by a single company or entity, in order to increase that company’s or entity’s power in the marketplace. Vertical integration differs across industries, firms within the same industry, and transactions within the firm. A company may expands its operations backward into industries that produces inputs to its products or forward into industries that utilize, distribute or sell it products.
The foreign exchange market is one of important mechanism in the international business because foreign exchange is an intermediary for all nations in term of the growth of the economy. There are many functions of foreign exchange market in the global economy. In the international business, it uses the foreign exchange markets in four ways. First, the pay...
The first of these exchange rates, nominal, is the number of units of a given currency that can purchase a unit of a given foreign currency (INSERT CITATION). When using this rate, countries are able to value of their own currency relative to one-another when trading in the foreign exchange market. This principle, however, is not exclusive to trading currencies. Similar to the nominal exchange rate, the real exchange rate uses goods and services in place of currency. As a result, it is defined as the amount of goods or services that can be traded in one country for a good or service in another country. Using this rate, countries are able to gauge the competitiveness of their goods and services in trading with any given country, making it a key factor for countries trading in the global economy.
Regional integration is the process by which two or more states agree to cooperate closely together to achieve peace, stability and wealth. Usually, integration involves one or more written agreements that describe the area of cooperation in detail, as well as some coordinating bodies representing the countries involved.