The paper "Australia’ s Home Loan Market Since 1980" is a wonderful example of a report on macro and microeconomics. The majority of investors don’ t enter directly into financial markets but use middlemen or intermediaries. The market structure for financial markets is perfect competition. Some of the players in macroeconomics are commercial banks, pension funds, mutual funds, credit unions, loan and savings associations, and insurance companies. When people deposit funds in a bank, the bank uses the money to give loans to home purchasers for mortgages. Apart from mortgages, banks can make loans to anyone for any other purpose.
A person who may have extra cash can also seek out borrowers, hence eliminating the intermediaries (Wood and Bushe-Jones, 1990). By eliminating the intermediaries, the saver can obtain a higher return. In the past two decades, the kind of market structure was an oligopoly, but many new players have entered the market recently, and thus why I believe that it is a perfect competitive structure. However, many people like using financial intermediaries because they provide fewer risks when compared to direct lending.
Another merit of financial intermediaries is that they provide liquidity to savers. Liquidity is the potential of converting assets into a spendable form, like money. However, economists argue that financial intermediaries can be a background of shocks to the economy, bumps which may interrupt the customary flow of economy life (Beer, 1999). The financial market is supervised or regulated by financial regulation, which poses certain requirements, guidelines, and restrictions (Wood and Bushe-Jones, 1989). This might be handled by non-governmental organizations or governments. The financial regulation endeavors to preserve the integrity of the financial system, enforce applicable laws, license suppliers of financial services, protect clients and inspect complaints, and impeach cases of market delinquency, like insider trading (Daniel, 2008).
Deregulation is the simplification of government regulations and rules which hamper the maneuver of market forces. Most people may think that deregulation means to eliminate laws against fraud, but it means to trim down government control of how business is maneuvered, thereby creating a room for free market (Inc Icon Group International, 2008). Deregulation is distinct from liberalization, where many competitors enter the market but prolong the regulation and assurance of purchaser rights and minimum and maximum prices, (Daniel, 2008).
Andrew Beer, Housing Investment and the Private Rental Sector in Australia: Urban Stud, Feb 1999; 36: 255 - 269.
Gavin A. Wood and Shane Bushe-Jones, Financial Deregulation and Access to Home Ownership in Australia: Urban Stud, Aug 1990; 27: 583 - 590.
Gavin A. Wood and Shane Bushe-Jones, Financial deregulation and access to home ownership in Australia. New York: Murdoch University, 1989. ISBN0869051547, 9780869051542.
Inc Icon Group International, Deregulation: Webster's Facts and Phrases, London: ICON Group International, Inc., 2008. ISBN0546652743, 9780546652741.
John Daniel, A fixed-rate loan prepayment model for Australian mortgages:
Australian Journal of Management, Apr 2010; 35: 99 – 112.
John Daniel, A Variable-Rate Loan-Prepayment Model for Australian Mortgages: Australian Journal of Management, Dec 2008; 33: 277 - 305.
Robert Breunig and Flavio Menezes, Empirical Approaches For Identifying Maverick Firms: An Application To Mortgage Providers In Australia: Journal of Competition Law and Economics, Sep 2008; 4: 811 - 836.