Question:
Part A
The financial system is complex in structure and function throughout the world. There are many different types of institutions: banks, insurance companies, mutual funds, stock and bond markets , and so on- all of which are regulated by Government. The financial system channels billions of Rupees per year from savers to people with productive investment opportunities. If we take a close at the financial structure all over the world, we find eight basic puzzles that needs to be solved in order to understand how the financial system works.
Required:
Explain in details the eight basic puzzles that needs to be solved in order to understand how the financial system works
Part B
Why is pegging the nominal interest rate problematic for Central Bank?