- What important functions do capital markets perform for national and global economies? Why should a country be concerned about the relative strength and performance of its capital markets?
Capital markets have many functions one of them being recruitment of reserves. Capital markets play a very vital role in mobilizing inactive reserves from the country. People are encouraged to invest their funds in the reproductive channels of the economy. Additionally, money markets aid in capital creation whereby there is an accumulation to the existing store of assets in the market. Capital markets too provide investment avenues since they heave capital for extended periods of time therefore providing an investment opportunity for those who desire to invest assets for an extended period of time. Capital markets too pace up Economic expansion and Development as it augments production and efficiency in the nationwide economy. Not only do capital markets assist in fund recruitment but it also aid in suitable regulation of these resources. Furthermore, capital markets provide a variety of services including extended and short-term loans to manufacturing, countersign services, check with services and export finance. Capital markets also ensure continuous availability of funds. A country should be concerned with the relative strength and performance of its capital markets since it is the main source of wealth for its people and is the one that holds the economy in place.
- What evidence does Peristiani present that indicates relative decline in U.S equity markets? What evidence suggests relative decline in U.S bond markets? Which of these concerns Peristiani more? Why?
Declines in foreign initial public offerings clearly suggest that the U.S. equity market is declining. It has been illustrate that in the past decade it was cheap to give in the U.S. bond market than in the Eurobond market and that countersign expenses have reduced constantly in U.S. in the last decade. These costs declined even at a faster rate in the Eurobond market thus eliminating the competitive wedge of the U.S. market. U.S. firms are also opting to issue their bond in the Eurobond market instead of the U.S. market. The bond market concerns peristiani more than the equity market since if with decline in the bond market has led to the loss in market share to overseas markets.
- Why have U.S bond markets lost market share to overseas markets? What potential risk does this trend hold for U.S financial markets?
The U.S. bond markets have lost share to abroad markets due to the go down in the qualified competition of the U.S. bond marketplace. The risk that this holds to the U.S. financial markets are that they might come crushing down reducing them to a lower level than the European countries.