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Financial System: An Introduction

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(20 ratings)
2 Reviews
Language:  English
This book covers the 6 elements of the financial system: lenders & borrowers; financial intermediaries, markets, and instruments; money creation; and price discovery.
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This book serves as an introduction to the financial system. The financial system has six elements: lenders & borrowers, financial intermediaries, financial instruments, financial markets, money creation and price discovery. It describes the non-financial surplus and deficit economic units (ie lenders and borrowers), and direct (between ultimate lenders and borrowers) and indirect (via the diverse financial intermediaries) financing. The financial markets (money, bond, forex, share/ stock, etc) are given much attention as the avenues for bringing together lenders, borrowers and financial intermediaries. This is where price discovery takes place. Money creation is afforded special attention because this is a significant element of the financial system and the economy in that it is here where new debt instruments are created. This takes place in the money market, and it is here where the central bank intervenes in its function as the financial system referee.

  1. Lenders & borrowers
    1. Learning objectives
    2. Introduction
    3. Defining the financial system
    4. Non-financial lenders and borrowers
    5. Summary
    6. Bibliography
  2. Financial intermediaries
    1. Learning objectives
    2. Introduction
    3. Financial intermediation
    4. Economic functions of financial intermediaries
    5. Financial intermediaries: classification and relationship
    6. Financial intermediaries: intermediation functions
    7. Summary
    8. Bibliography
  3. Financial instruments
    1. Learning objectives
    2. Introduction
    3. Financial instrument types
    4. Share instruments
    5. Debt instruments
    6. Deposit instruments
    7. Instruments of investment vehicles
    8. Derivative instruments
    9. Summary
    10. Bibliography
  4. Financial markets
    1. Learning objectives
    2. Introduction
    3. Money market
    4. Bond market
    5. Share market
    6. Foreign exchange market
    7. Derivative markets
    8. Organisational structure of financial markets
    9. Financial market participants & short selling
    10. Clearing and settlement
    11. Bibliography and references
  5. Money creation
    1. Learning objectives
    2. Introduction
    3. What is money?
    4. Measures of money
    5. Monetary banking institutions
    6. Money and its role
    7. Uniqueness of banks
    8. The cash reserve requirement
    9. Money creation does not start with a bank receiving a deposit
    10. Money creation is not dependent on a cash reserve requirement
    11. Is “money supply” a misnomer?
    12. The money identity and the creation of money
    13. Role of the central bank in money creation
    14. How does a central bank maintain a bank liquidity shortage?
    15. Bibliography
  6. Price discovery
    1. Learning objectives
    2. Introduction
    3. What is price discovery?
    4. Price discovery and information
    5. The mechanics of price discovery
    6. Role of central bank in price discovery
    7. Composition of interest rates
    8. Role of interest rates in security valuation
    9. Market efficiency
    10. Bibliography and references
  7. Endnotes
This book is very interesting and a great guide to financial systems.
This book provides an excellent contextual view of the core elements of the financial system. Professor Faure provides a comprehensive introduction to financial systems, without the clutter of excess detail. A rewarding read.
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About the Author

Prof. Dr AP Faure

Alexander Pierre Faure graduated from Elsenburg Agricultural College after school and went on to Stellenbosch University where he graduated with BA (Commerce), Hons BA (Economics), MA (Economics), and PhD (Economics).

He also successfully completed the Stockbroker Examination Requirements at Witwatersrand University (and is a registered Stockbroker - presently non-broking status).

He first worked for the central bank, where he was involved in compiling the monetary statistics (money stock and sources of change, and money market liquidity analysis) and later in the execution of monetary policy.

His career after central banking included private sector banking (the recipient of monetary policy), stockbroking (influenced by monetary policy) and interest rate analysis (reading monetary policy).

After his private sector experience, he became an academic and held the positions Investec Chair in Money and Banking (at Rhodes University and the University of Fort Hare) and Foord Chair in Investments (at Rhodes University).

After retirement he was appointed Professor Emeritus at Rhodes University, and remains engaged in research.  

He has published widely, including books and papers.

He also served on a number of boards of directors, holding the positions of Non-executive Director and Managing Director.