The financial system is an interconnected global network of markets, institutions, and participants that facilitate the exchange of funds and financial instruments between households, businesses, and governments. Its purpose is to economise the allocation of scarce resources in order to maximise returns and manage risk across a wide spectrum of investments, from deposits and debt instruments to equity securities, derivatives, and alternative investments. It is an essential component of modern economics and an ongoing challenge for policymakers to ensure its efficacy in generating economic growth and promoting financial stability.

See also: economic system, climate model, ecological economics, political economy, federal reserve