Carnegie Mellon University
Commentary: The Financial System and Economic Performance.pdf.pdf' (426.84 kB)

Commentary: The Financial System and Economic Performance

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journal contribution
posted on 2000-01-01, 00:00 authored by Allan MeltzerAllan Meltzer

Robert Merton's article should be read by anyone who is interested in the past or future evolution of financial markets. Merton develops parts of finance theory and their implications for financial markets and financial policy in a clear, crisp, and informative way. It is an excellent piece, well worth a reader's investment of time. The article starts with a broad overview of the services provided by financial institutions in a market economy: the efficient allocation of savings, the development of signals or information in the form of market clearing interest rates, asset prices, and risk premiums that guide resource allocation. It also includes the provision of a payments system that facilitates transactions by reducing the time and effort that households, corporations, and governments devote to purchasing and processing payments for purchases.




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