The System and Structure of Financial Markets

Author: Zhou Ye'an
Publisher:
Publish Date: 2005-05-01
Features: This work attempts to elaborate on a theory of the institutional structure of markets. In the past, economists, when understanding markets, only considered the market for a representative commodity and service, simplifying its formation and functioning process into a price mechanism, failing to recognize the relationships between markets. This book argues that, just as Coase answered the nature of the firm, economics also needs to address the nature of the market. According to the basic theories of new institutional economics and the Austrian School, the market is regarded as an institutional arrangement, a process. As an institutional arrangement, the market has certain definite functions, but the mechanisms by which different markets achieve these functions vary. This book demonstrates that, due to functional similarities, heterogeneous markets exhibit a degree of substitutability; due to the strategic actions taken by parties engaging in market transactions, spillover effects objectively arise, leading to strategic complementarity between heterogeneous markets; the substitutive and complementary relationships between heterogeneous markets influence the mechanism of financial development on economic growth, compelling us to reassess the role of the government in financial development. This book also uses China's empirical data and materials to analyze the process of financial marketization since reform and its impact on economic growth. These findings reveal that, during the reform process, although financial marketization experienced fluctuations, it was generally on an upward trajectory. In the process of financial marketization, government regulation of financial markets has caused significant losses in resource allocation, while the marketization process itself has clearly promoted economic growth. Government regulation of financial markets is not aimed at improving efficiency and fairness, but merely to appease short-sighted and risk-averse investors and media and other societal groups.