Definition of International Financial Markets

Introduction

The financial system, consisting of financial institutions, financial instruments and financial markets, provides and effective payments and credit system and thereby facilitates channeling of funds from the savers to the investors in the economy. The task of financial institutions or financial intermediaries is to mobile savings and ensures efficient allocation of these funds to high yielding investment projects. The process gives rise to different types of money and financial instruments such as bank deposits, loans and equity and debt instruments

Just as domestic financial markets have two segments short-term money market and capital market- international financial markets do also have these two segments. In the short-term money markets funds for short periods are loaned and borrowed. Commercial banks and non-bank financial intermediaries participate in this market. In the capital market long –business houses through equity and bond issues raise term capital. Development bank and long-term financial institutions participate in the market. Sovereign Governments and public sector enterprises are to issue bonds to meet their financial needs.