O'Reilly logo

Intermediate Financial Theory, 3rd Edition by John B. Donaldson, Jean-Pierre Danthine

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

Chapter 1

On the Role of Financial Markets and Institutions

Chapter 1 considers the role played by the financial system in the economic life of a society. In general terms, a financial system allows for the income and consumption (or, in the case of firms, investment) streams of economic agents to be desynchronized; that is, made less similar, across both time periods and states of nature (uncertain events). We consider how the functioning of the financial system can have substantial consequences of the growth of an economy and for its business cycle properties.

Keywords

Arrow–Debreu securities; Great Recession case; Edgeworth–Bowley box; Pareto optimal; complete financial markets; competitive equilibrium

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required