Question

a. "A robust financial market is one of the pillars of stable economic growth and secured financial sustainability for the future." Discuss. b. Why do managers of financial institutions care so much about the activities of the Central Bank?

Answer 1

a) Financial market help in directing the flow of savings and investments into the economy in such a manner that it facilitates capital for the production of goods and services. The robust financial market with various financial products suitable to different needs of borrowers and lenders help in building a strong and developed economy of a country. Financial institutions facilitates the smooth flow money into the market. Thus, its robust nature help in the growth and sustainability of the economy. The financial market comprises of bonds, shares , money market instruments and financial instruments which help in circulating money into the market catering to the various needs of borrowers and lenders, thus boost the economy.

b) Managers of the financial institutions care about the activities of the central bank as the decision of the managers in setting the borrowing and lending rates rely on the activities of central bank. Central bank used to increase or decrease the interest rate by controlling the monetary policies which help in controlling the inflation and entire money supply of the nation. Thus, managers keep an eye on the activities of the central bank.