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Financial Markets and Intermediaries

  • Y. C. Jao

Abstract

To understand fully and evaluate the role of banking institutions in economic development, one has to study them in a wider context of financial markets and other non-bank financial intermediaries. The commercial bank is but one of the many financial intermediaries, even though it may be the most important one. Banking activities moreover exert their impact on the liquidity position of the economy through financial markets. The economic system may be visualised as consisting of various financial and real markets, whose continuous interactions determine the levels of real output and prices. On the other hand, the structure of the financial markets and the development of non-bank financial intermediaries can have an important bearing on the behaviour pattern of the banking system, especially in a laissez-faire regime without a central bank such as Hong Kong. For example, the extent to which the stock market acts as an adequate source of equity capital will affect the role of commercial banks as suppliers of long-term finance, while the existence of intermediaries which specialise in financing a particular industry or sector (e.g. housing development) will affect the portfolio of earning assets of commercial banks.

Keywords

Stock Market Financial Market Stock Exchange Commercial Bank Banking Sector 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Notes and References

  1. 1.
    See J. G. Gurley and E. S. Shaw, ‘Financial Aspects of Economic Development’, American Economic Review (Sept 1955) pp. 257–66Google Scholar
  2. J. G. Gurley and E. S. Shaw, ‘Financial Intermediaries in the Saving-Investment Process’, Journal of Finance (May 1956) pp. 257–66Google Scholar
  3. J. G. Gurley and E. S. Shaw, Money in a Theory of Finance (Washington, 1960).Google Scholar
  4. See also R. W. Goldsmith, Financial Intermediaries in the American Economy (Princeton, 1958)Google Scholar
  5. R. W. Goldsmith, The Determinants of Financial Structure (Paris, 1966)Google Scholar
  6. R. W. Goldsmith, Financial Structure and Development (New Haven, 1969).Google Scholar
  7. 2.
    Tun Wai, ‘Interest Rates in the Organized Money Markets of Underdeveloped Countries’, IMF Staff Papers (August 1956) pp. 249–78Google Scholar
  8. Tun Wai, ‘Interest Rates Outside the Organized Money Markets of Underdeveloped Countries’, ibid., (Nov 1957) pp. 80–125Google Scholar
  9. Hla Myint, The Economics of the Developing Countries (New York, 1964) Chapter 5.Google Scholar
  10. 3.
    J. S. G. Wilson, Monetary Policy and the Development of Money Markets (London, 1966) p. 218.Google Scholar
  11. 4.
    H. P. Minsky, ‘Financial Intermediation in the Money and Capital Markets’, in Pontecorvo, Shay, and Hart, (eds), Issues in Banking and Monetary Analysis (New York, 1967) p. 40.Google Scholar
  12. 5.
    This statement applies also to the Peking-controlled banks. However, recently there are reports that the smaller Peking-controlled banks have privately borrowed from other Hong Kong Chinese banks outside the official market for much longer terms (up to one year or eighteen months), apparently to meet China’s expanding foreign exchange requirements in financing trade. See A. R. Millar, ‘How China Gets Credit’, Insight (Dec 1972) p. 7.Google Scholar
  13. 6.
    Hang Seng Bank Research Department, Hsiang-kang yin-hang yu chin-yung (Money & Banking in Hong Kong) (1964) p. 11.Google Scholar
  14. 9.
    For a discussion of this world trend, see ‘The Internationalization of Capital Markets’, in J. S. G. Wilson, Monetary Policy and the Development of Money Markets (London, 1966) pp. 330–47Google Scholar
  15. I. O. Scott, ‘Recent Innovations in International Capital Markets’, in Pontecorvo, Shay and Hart, (eds), Issues in Banking and Monetary Analysis (New York, 1967) pp. 191–203Google Scholar
  16. R. N. Cooper, ‘Towards an International Capital Market’, paper presented to the conference of the International Economic Association, (Aug-Sept 1969)Google Scholar
  17. M. Mendelson, ‘The Eurobond and Capital Market Integration’, Journal of Finance (March 1972) pp. 110–26.Google Scholar
  18. J. A. F. Wilson, ‘Development of Hong Kong Stock Market’, Hong Kong Manager (May/June 1972) pp. 11–14.Google Scholar
  19. 11.
    D. L. Millar, ‘Banks Playing Big Part in Development’, South China Morning Post Banking, Finance & Investment Review (12 Oct 1972) p. 13.Google Scholar
  20. 15.
    Hang Seng Bank Research Department, ‘Hsian-kang wai-hui shih-ch’ang’ (Hong Kong’s Foreign Exchange Market), Hang Seng Newsletter (16 May 1969) pp. 1–5.Google Scholar
  21. 18.
    J. H. Lucas, ‘Hire Purchase in a Free Society’, South China Morning Post Banking, Investment, and Finance Review (12 Oct 1972) p. 19. Recently, some finance companies have begun to handle block discounting and factoring which are quite new to Hong Kong.Google Scholar
  22. 22.
    Lee Kam Hon, The Marketing of Ordinary Life Insurance Policies in Hong Kong, unpublished M. Com. thesis (The Chinese University of Hong Kong, 1969).Google Scholar

Copyright information

© Y. C. Jao 1974

Authors and Affiliations

  • Y. C. Jao
    • 1
  1. 1.University of Hong kongChina

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