Bank Business Models at Zero Interest Rates

In particular, the world’s central banks have demonstrated a growing interest in the ways in which financial systems can develop in order to maximise their contribution to the real economy. Since the financial crisis, household debt has increased rapidly in a number of economies across the Asia-Pacific region as well.

Financial Systems and the Real Economy

In light of this, the Central Bank of Malaysia (Bank Negara Malaysia) and the Bank for International Settlements (BIS) collaborated to organise a research conference in Kuala Lumpur from October 16-18, 2016, under the theme “Financial Systems and the Real Economy.” The event was a wrap-up conference for a research programme that the BIS Representative Office for Asia and the Pacific had been working on since February 2015, when it was approved by the Asian Consultative Council of central bank Governors. The conference brought together senior officials and researchers from international organisations, central banks, and academic institutions from all over the world.

The topics that were discussed in the papers that were presented at the conference included macroprudential policies and firm financing; household credit, growth and inequality; capital structure in emerging Asia; foreign banks and credit conditions in emerging market economies; household credit and the effectiveness of monetary and macroprudential policies in the Asia-Pacific region; household indebtedness and debt repayment capacity; and capital structure in emerging Asia. This volume is a compilation of the keynote addresses, papers, prepared discussant remarks, and panel remarks that were given at the conference.

A General Comparison of Economics and Finance

Economics and finance are closely related fields that mutually inform and influence one another, despite the fact that they are frequently taught and presented as independent disciplines. Investors are interested in the findings of these studies because they have a significant impact on the financial markets. When it comes to economics and finance, investors should steer clear of the “either/or” debate as much as possible because both fields are significant and have useful applications.

As a broad field of study within the social sciences, economics focuses primarily on the big picture, or more general questions regarding human behaviour in relation to the distribution of tangible resources. The methods and applications that are utilised in effective money management make up the primary focal point of finance. The evaluation of risk and return by companies and investors is a topic that is central to both economics and finance. Historically, economics has been known for its greater emphasis on theory, while finance has been known for its greater emphasis on practice. However, in the past twenty years, this distinction has become much less clear.

In point of fact, it appears that the two fields are becoming more similar to one another in certain respects. Professionals in the fields of economics and finance are in demand in a variety of settings, including corporations, government agencies, and financial markets. Both are likely to continue to be of critical importance to the economy, investors, and the markets well into the foreseeable future, despite the fact that there will always be a separation at some fundamental level.

Taking Into Account Particulars

Economics has the potential to be a powerful source of guidance and influence on decision-making at the national level, provided that economists are successful in their goals to understand how consumers and producers react to changing conditions. In other words, the way in which governments approach taxation, regulation, and government spending all have real-world repercussions; economics can provide insight and analysis regarding these decisions.

The study of economics can also assist investors in comprehending the potential effects of events and policies at the national level on the state of the business environment. Investors can gain the tools necessary to predict macroeconomic conditions and understand the implications of those predictions on companies, stocks, and financial markets if they have a solid understanding of economics.

Understanding how shifts in factors such as national income, inflation, interest rates, and long-term economic growth affect markets and, ultimately, stocks is one of the applications of this research. Finding out how changes in monetary policy made by central banks such as the Federal Reserve in the United States can have an effect on the economy, both in the United States and around the world, is an important area of focus for economists.

Conclusion

Market participants can use economics as a tool to better understand the factors that lead to various market events, the likely outcomes of those events, and the impact those events have on a variety of industries, companies, and the business cycle as a whole.