Question

Discuss three roles of the Government in Financial Markets. In your discussion
provide specific examples this role within the Ghanaian context with appropriate
references where necessary

Answer 1

Government play an important role in structuring of the overall financial markets. Those countries who have better financial systems experience faster economic growth and enjoy low level of poverty and income inequality so a good governance is required for a better growth of the financial market.

A) Givernment is required to check the strength of its currency and it also must monitor the banks equity and reserves because the value of the national currency is dependent upon the money supply and the growth rate of Bank is dependent upon deposits who are dependent upon a growing economy.

B) government is also responsible for taxation regimes and it has the power to change the tax structure in the entire financial system so the change of the tax structure can lead to boosting of the profits of various companies because when the government decreases the overall tax on the corporate it would lead to higher profits and increase in the total shareholders value and it will also lead to overall increase in the gross domestic product.

C) the government is also primary body who will bail out different sectors at the time of the financial distress, so the government have the required power as well as the money to bail out various financially distressed company in order to control the spread of contagion and make the economy healthy by making various companies survive who were earlier financially distressed.

Ghanian economy is relatively small economy, and the interference of the government in the financial system is very important in order to make it grow at the challenging times of coronavirus because it needs to survive and sustain through this tough times in order to exploit the financial prosperity.