Jamshid Damooei, PhD
Functions Performed by Global Financial Systems and Markets
Savings function. The global system of financial markets and institutions provides a conduit for the public’s savings.
Wealth function. The financial instruments sold in the money and capital markets provide an excellent way to store wealth.
Liquidity function. Financial markets provide liquidity for savers who hold financial instruments but are in need of money.
Credit function. Global financial markets furnish credit to finance consumption and investment spending.
Payments function. The global financial system provides a mechanism for making payments for goods and services, in the form of currency, checking accounts, debit cards, credit cards, digital cash, etc.
Risk protection function. The financial markets offer protection against life, health, property, and income risks, by permitting individuals and institutions to engage in both risk-sharing and risk reduction.
Policy function. The financial markets are a channel through which governments may attempt to stabilize the economy and avoid inflation.