Abstract
The aim of the article is to present the role of the financial system in economic growth and development. The first part presents the traditional understanding of the relationship between the economic system and economic growth. The second part presents the experience of financial crises and their impact on the conversation on the mutual relations between the financial sector and the real sector. The third part shows the role of the state in the financial system. The article describes the arrangement of interrelated financial institutions, financial markets and elements of the financial system infrastructure. It shows what part of the economic system the financial system is, and whether it enables the provision of services allowing the circulation of purchasing power throughout the economy. The article presents the important role of the financial system, the role related to the transfer of capital from entities with savings to entities that need capital for investments. It shows the financial system as a set of logically related organizational forms, legal acts, financial institutions and other elements enabling entities to establish financial relations in the real sector and the financial sector, and this system forms the basis of activity for entities using money, enabling the conclusion of various economic transactions, in which money performs various functions. The article also presents the concept of a financial crisis as a situation in which there are rapid changes in the financial market, usually associated with insufficient liquidity or insolvency of banks or financial institutions, and as a result, a decrease in production or its deepening. The article also includes issues related to the impact of public authorities (state and local authorities) on the financial system in the economy.
Highlights
The financial system is an element of the economic system and is characterized by a specific specificity of operation
The scope of the policy that supports market processes in the financial sector is the subject of many discussions, while its basic solution is dominant in the literature on the subject
This situational understanding differs from the discussion on whether such intervention leads to economic growth in the long run
Summary
The financial system is an element of the economic system and is characterized by a specific specificity of operation. The real economy and the financial sphere can be distinguished in the economic system. The financial sphere includes the financial system, i.e. the mechanism that enables the circulation of purchasing power in a given economy. The main essence of the financial system is the intermediation in the flow of purchasing power between non-financial economic entities, as well as its co-creation of the financial system. We can distinguish financial entities, financial instruments, specific financial markets, as well as the principles determining the method of their operations
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