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

Author:Madalina Antoaneta Radoi
Pages:213-216
SUMMARY

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 ... (see full summary)

 
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Alexandru Olteanu • Madalina Antoaneta Radoi
213
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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