Financial structure and macroeconomic stability Research Paper

Financial social organisation and macroeconomic stability - Research Paper ExampleHowever the ability of the insurance policy makers and financial regulators to work through different rules depends upon the control they have upon reducing inflation and siding volatility. The transmission of care rate fluctuations to fruit levels and prices depends upon a countrys policies regarding banking and management of financial markets. For most policy makers, in majority of the nations, dogmatic the interest rates in the short run is considered to be most important. Policy development and interest rate changes are however effective only when they lead to an increase the level finance ready(prenominal) to firms and individuals who are willing to invest in projects or shift consumption. In many nations it is observed that the banking remains is guarded from the impact caused by monetary policies through barriers which are created by the government (Iakova & Wagner, 2001). Monetary polic y which gets transmitted to the real economy and thereby impacts the lending policies of the bank requires to be altered as they keep growth. When the government sheds the assets of the bank, they indirectly create scope for the central banks to bring about stability in output and inflation rates. Therefore establishing a control over the assets possessed by the bank is a fitting way by which it is possible to manage the macro-economic environment. The deposit insurance system is also identified as a crucial factor in the financial regulatory system which affects the economy. The absence or the mien of a deposit regulatory system affects the readiness of bank managers to undertake risks. Subsequently the access forthcoming to firms to raise finance through equity and bonds may also get affected. Financial regulators are a great deal seen to use bank loans as a tool to implement monetary policies. Therefore if firms are to a greater extent dependent upon banks, then the efficien t implementation of