The Economics of the Financial System

This second edition presents an updated analysis of the roles played by financial institutions and markets in the working of the UK economy. It addresses the internationalization of capital markets and monetary policy and the increasing competition between banks in the light of technological advances. The introduction provides an overview of the system, and subsequent sections deal with the theory of the financial system - including the factors governing interest rates in Britain - the saving, investment and financial behaviour of the main sectors of the economy, the modes of operation of the financial institutions and markets, and the regulatory system. The final chapter examines the efficiency with which the system fulfills its functions in the economy, reaching a mixed verdict.