EconDev

• Players in the economy

  • Businesses issuing securities (debt and equity) or financial instruments
  • Households who lend and borrow from financial intermediaries
  • Government that never overfunds and is considered always in a shortage
  • Financial intermediaries that position between the debtors and the creditors
• Indra Nooyi, 1955: 'We must change the dialogue from what we do with money we make to how we make the money.'
• Money


  Medium of exchange, store of value, unit of account, standard of measurement
• Legal tender


  The form by law a debtor may acquire a creditor to accept in payment of a debt
• Financial system


  A network of institutions, markets and contracts that bring together lenders and borrowers
• Lenders


  Those who believe their money has the potential to grow in the future, so they lend it to financial institutions
• Borrowers


  Households that need to buy a house/car but don't have enough money, firms that need more capital, governments that spend more than they own
• Ways lenders and borrowers agree to fulfil their goals

  1. Banking system

  2. Bond market

  3. Crowdsourcing
• Investment


  Committing funds to one or more financial or real assets
• Savings


  Part of wealth that may be used to fund investment
• Financial asset


  Someone else's liability, manufactured by the stock market or any financial institution, affected by inflation
• Investment assets/classes


  • Stocks
  • Bonds
  • Currencies
  • Real estate
  • Commodities
• Money market


  Market for short-term instruments that mature in less than one year
• Capital market


  Market for long-term instruments that mature in more than a year
• Financial derivatives


  Forms of financial instruments, value derived from another instrument
• Investment process


  1. Portfolio management

  2. Asset allocation

  3. Construction decision
• Money


  Coin, pieces of stamped metal used as a trading medium, any currency used in the same way
• Cash


  Money on hand
• Debentures


  Instrument issued as evidence of a borrower's debt to a lender, used by companies to raise long-term finance
• Investment management


  Channelling of funds by financial intermediaries, transferring and scheduling of risks, appropriation of investment class, managing ownership of funds
• Competitive market


  Optimizes risk and returns, efficient investment market, appropriate investment style (active, passive, or combination)
• Key players in financial systems

  • Businesses issuing securities (firm)
  • Lenders and borrowers (household)
  • Government
  • Financial intermediaries
• Role of financial systems in economic development

  1. Flourish savings and investment relationship

  2. Develop labor and employment

  3. Growth in capital and securities markets

  4. Trade development

  5. Infrastructure and technology development

  6. Uphold fiscal policy

  7. Attract foreign investment

  8. Foster economic integration

  9. Balance regional development

  10. Sustain macroeconomic balance