Financial institutions help to provide the liquidity in the economy. The financial institutions provide the best source for the liquidity which includes the credit. The credit issued by the banks help in the economic expansion of the country and helps the business in undertaking the new ventures without save the necessary money. Financial institutions used different tools in order to provide the liquidity in the economy. The buying and selling of securities are the most crucial tool of the financial institutions that helps to provide liquidity in the economy (Gennaioli et.al, 2014). The goal of the economic development is to provide the economic growth in the economy. If the investment becomes profitable it will help the sustainable growth …show more content…
This process of flow of funds can be direct (market-based financing) or indirect (bank-based financing). Finance is the stomach of every country without the stomach all the organs of the body cannot perform their functions similarly, without the finance the country cannot operate it functions. The financial system includes the financial markets, institutions, and instruments. The financial markets have a vital role in the economy of every country. There is a positive relationship between the economic growth and the financial markets of the country. The financial systems help the country in the financing decisions. The financial markets help to provide the better allocation of resources in the economy (Bolton et.al, 2016). The financial markets provide different advantages in the economy. The financial institutions play an important role in the allocation of capital and provide the restrictions in the economy that helps to provide the growth in the economy. The multinational and the local organizations move towards the financial markets in order to find the solutions to their crucial needs. The financial markets have high credit ratings and they also provide help in order to deal with the inflation of the economy. The financial markets provide the profitable investment opportunities to the companies. It is not essential that the securities markets must always be …show more content…
This time includes the maximum period of one year or less than a year. All of the essential instruments which are used in the money markets include collateral loans, deposits, bill of exchange and acceptances. The most crucial institutions operating in the money markets include commercial banks and central banks. The concept of liquidity is used in the money markets. When the company receives the short term debt, it is used in the working capital or in the operating expenses of the company. The money market helps the companies and the government in maintaining the level of liquidity. The money market is the safer place for all the investors to invest the funds. There is low risk in the money markets as compared to the capital markets (Wai et.al,