Banks and financial intermediations' global roleof in markets' general equilibrium

• Author: Madalina Antoaneta Radoi
• Pages: 213-216

Alexandru Olteanu • Madalina Antoaneta Radoi

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LESIJ NO. XVII, VOL. 2/2010

BANKS AND FINANCIAL INTERMEDIATIONS’ GLOBAL ROLE

OF IN MARKETS’ GENERAL EQUILIBRIUM

M<d<lina-Antoaneta R;DOI∗

Abstract

Due to globalization factors, financial intermediations still create many problems to

national economies as far as the markets’ general equilibrium is concerned. Although the world is

divided into more than 200 nations with unequal power, there is less than half a dozen key

currencies to go round to facilitate the international financial transactions. Considering that the

combinations between the flexible exchange rates and the free circulation of capital and

information have made the financial system be strongly interconnected internationally, however,

some national economies preserve financial circuits that are not indirectly integrated in the world

system.These aspects have led to the analysis of the relations between the financial intermediaries

on domestic and foreign markets, the banks and financial intermediations’ global role in national

economies and internationally.

Keywords: Neoclassical equilibrium model, Walraien model, Neoclassical financial

market, financial system, capital marginal efficiency

Introduction

Markets mainly function based on two models:

The Neoclassical perfect equilibrium model that comprises the general equilibrium

properties belonging to goods markets and the production factors, those belonging to financial

markets as well. Both properties have the same form: the atomicity of supplies and demands, the

homogeneity of the products, the transparency of the exchanges and the mobility of the financial

resources.

In perfect competition, the free allocation of capital allows that its economic performance

rise to an optimum level

The basic Walraien model that has several characteristics: the economic and financial

decisions are made by rational individuals that are perfectly informed on market conditions at any

moment; the so called pure and perfect “competition” excludes all the forms of power on prices;

equilibriumd prices are the result of anonymous forces.

In a perfect information system, in other words in a world without any risks and private

information, the financial capital is an item with homogeneous and constant quality; pro temporis

interest rates are enough to remunerate the lender; the saving supply depends on the preferences

for the present and on the consumption desires. The revenues are split up between the payment of

capital loans and that of the employment. There is no reason for profits to exist. Companies lose

their last individual supplies. Economic agents keep their goods supplies and their accounts that

overtake market prices; deficits are stopped without leading to bankruptcy. They become suppliers

of different goods; the reconversion is done without unemployment.

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∗ PhD