Financial Markets

Overview of the Research Group "Financial Markets"

Financial intermediaries, households, businesses, and the regulatory framework provided by the government and the legal system with regard to financial transactions together constitute the "financial system."

Financial systems fulfill three basic tasks:

  • Efficient allocation of savings;
  • Efficient distribution of risks; and
  • Reduction of information asymmetries.

Over the last 25 years, the quantitative and qualitative expansion of financial transactions has sparked an intensive debate among economists and politicians about the interrelation between the organization of the financial system and the growth of a national economy.

The research group Financial Markets of DIW Berlin engages in this debate about the interrelation between financial systems and growth. Research findings on financial intermediation as well as financing patterns of domestic businesses, the banking system, and domestic financial markets are used to represent the particularities of the German financial system (compared with market-oriented systems of other European countries and the United States) and to identify the effects of the driving forces of the financial market integration on the performance of the financial system and the growth of national economies.

In consideration of findings about the workings and the capabilities of financial systems in developed economies, the group analyzes the significance and the process of financial systems development in emerging economies. The goal is to derive therefrom concrete design recommendations for building an efficient financial infrastructure.

Both of these themes are examined from a micro- as well as macro-economic perspective. The research group Financial Markets and Financial Institutions thus takes on cross-section tasks that tie in with numerous aspects of both national political economics and business administration.