In our country, we pay more attention on capital market than money market espcially its base----negotiable instrument market which is not only the base of the money market but also the whole finance system.
The price bubbles of asset are normal phenomena in the capital market, and within reasonable bounds the price bubbles of asset will not risk the running of the capital market. However, if the asset price has severe bubbles, the break of the bubbles will result in serious risk to a country's finance system and even to the whole economy system.
Owing to the uncertainty of financial assets, the instability of financial systems, and the random walk characteristic of the prices of securities, the risk is a fundamental characteristic of financial system. So the systematical risk of stock market is unavoidable.
A strategy of China's financial reform is to construct the financial system of the market-leading type,namely to set up the modern financial system on the basis of the fully developed capital market.
Meanwhile, innovation of financial instrument brings the innovation of the pattern of financial idea and financial circles division of work, rounding the forming process of the real transaction price of the financial assets, the whole financial system makes a new fixed position again, the operational efficiency of the financial system improves further.
It not only helps to reduce the slow assets rate of the financial institution in china, and improves their own competition, but also is favorable to the reform of the investment and financing system and the adjustment of economic structure in china. It will tamp the financial foundation and complete the financial system.
The new financial system based on diagnosis-related groups will be in favor of private investors compared to the governement-dependent university hospitals.
In 2000, Ecuador adopted the dollar as its official currency and gave up the sucre in a desperate move to halt inflation and help a distressed financial system.
The results show that the government has to embark on SME policies designed to disseminate the information on support programmes widely, and to speed up the reform of the financial system, legal framework and law enforcement.
As noted by Gurley and Shaw, there is a typical pattern of economic development in which the evolution of the financial system is an essential aspect of the growth process.
The paper uses a general equilibrium model of the financial system to explore whether banks would choose to use a countercyclical, procyclical or neutral rating scheme.