How does finance markets affect economical development?

How do financial markets affect the economic development?

Financial markets play an involving and lively role in economic development, and a meeting point between the units that have cash surpluses and between those with deficits, These units may represent individuals, private institutions, or government sector, regardless of whether these markets are local or global.

The different effects between financial markets and the development economy, as financial markets are affected by calculations and price developments..etc, here the financial markets are more affected and highly responsive, also financal markets affect development negatively or positivly on both short and long term.

Stock prices of listed companies fall when the economy suffers from a recession due to the scarcity of resources,also by the oil prices up and down, and by future expectations which motivates investors to buy stocks or sell them.

We can tell that Financial markets act as a mirror that reflects economic reality through the interaction of supply and demand forces and their impact on the economic situation.

But if we see the impact of the economic situation on the financial markets is fast and the results may appear just because of expectations that may hit or disappoint and the reaction is often immediate.

How is the impact of financial markets on the economy?
Capital markets encourage savers to invest their surplus funds in paper securities due to lack of availability of investment ideas And because they do not have sufficient capacity to create an independent investment activity, financial markets become a viable environment for investing surplus funds and moving them towards development.

Also Financial markets help build capital by offering securities and bonds enabling the government to borrow to finance short and long-term development plans.

Capital markets contribute to directing capital to the most profitable areas, and this requires the availability of several features in the stock market, the most important ..

  • Pricing efficiency
  • Operating efficiency;

  • Market equity;

  • Safety;

  • Market depth;

  • Market continuity;       

Realistically determine the prices of securities on the basis of adequate knowledge and a high degree of fairness.

Financial markets also provide an adequate database of investment geography to help diversify investments, diversify economic fields and distribute capital fairly so as not to accumulate in a particular economic activity without the rest of the activities.

Based on the above we can say that Financial Markets play a viable and important role in pushing the strings of development and economical growth and that role is presented on the financing side and  mobilize savings and transfer them to investments in an easy way and provide a database in a scientific way that identifies opportunities for local and foreign investors while providing the right  legal environment thats safe and accurate for investment which makes it easy for everyone to enter and exsit the market and helps gain profit and diversify investment fields.


Source: Nour Eldin Othman – 3rd of August 2015

https://alphabeta. .


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