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Compare and contrast the financial systems of two different countries. Use an institutional approach to describe the system. Comment on the impact on, and response to the GFC in each country

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Compare and contrast the financial systems of two different countries. Use an institutional approach to describe the system. Comment on the impact on, and response to the GFC in each country
1.0 Introduction
A financial system inquires for efficient allocation of resources among the surplus and deficit units (Viney 2009) as such it encourages more savings where funds are provided for investor to invest and also ease the transactions for goods and services (Viney 2009). There are three main components in the financial systems which are the financial institutions, financial instruments and financial markets. All three types of financial system each carry different function, roles and regulations. However, financial institutions will be mainly focus in this research essay. Global Financial Crisis (GFC), also known as the ‘great recession’ occurs in the year of approximately 2007-08. GFC has caused a several impact on the economy which leads to a several collapse of the financial institutions. For instance, the collapse of Lehman Brothers, one of the major investment banks in US (Australia Bureau of Statistics 2010). Thus, the objective of this essay is to examine both financial system of the chosen countries which are United States and Australia, also the impacts and responses on the GFC in both of the chosen countries.

2.0 Compare and Contrast both Financial Systems
2.1 Central Bank
The central bank of the United States (U.S.) is known as Federal Reserve System (FED) whereas the central bank of Australia is known as the Reserve Bank of Australia (RBA).

The Federal Reserve System’s structure consist of the Board of Governors which are duly appointed by the president, the Federal Open Market Committee (FOMC), and 12 regional Federal Reserve Banks located throughout the major states in the country (The Federal Reserve Board 2003).

Banking in U.S. is regulated at both federal and state level. Unlike U.S., Australia has only one central bank which is the Reserve Bank of Australia. However, both central banks are independent within their government (Reserve Bank of Australia 2001) whereby for FED, the monetary policies decisions do not have to



References: Kumar, A, Chuppe, T & Perttunen, P 1997, The Regulation of Non-Bank Financial Institutions, The International Bank for Reconstruction and Development, U.S.A. McLennan, W 2000, 2000 Year Book Australia No.82, Australia Bureau of Statistics, Australia

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