The author provides a significant discussion on the essence of financial markets. Indeed, they are the most volatile element of the modern market economy. On the one hand, they reflect changes in trends emerging in the real sector, and on the other hand, they have a strong influence on it. Under these conditions, scientific discussions continue about the need for state intervention in the market mechanism. Modern economists agree that the market does not always optimally allocate resources. In this case, the following limitations are most visible (Braun et al., 2018). The first is transaction costs, mainly associated with obtaining information, which limit the free movement of resources. Second, these are the factors of time, uncertainty, and risk, which can distort prices, and market forecasts and negatively affect the allocation of resources. Third, it is the neutrality of the market to the social and moral norms of society and the inability of the market to produce public goods, which also do not contribute to the optimal distribution of resources.
Then, the author formulates six key responsibilities of financial markets, from which the below ideas follow. The larger the financial market, the more complex and diverse its instruments are, and the more important the analysis of the effectiveness. The creation of a financial market focused on economic growth covers complex theoretical, methodological, and practical problems, the solution of which, of course, is of great economic importance. First of all, this implies the need for a comprehensive study of the relationship between the financial and real sectors of the economy, which will allow approaching the formulation of the theoretical provisions of the concept of financial sector productivity. Its central idea is to strengthen the influence of the financial sector, financial markets, and financial institutions on economic growth and economic development in general.
Reference
Braun, B., Gabor, D., & Hübner, M. (2018). Governing through financial markets: Towards a critical political economy of Capital Markets Union. Competition & Change, 22(2), 101–116.