What is the role of a financial market in the economy?

Financial markets play a critical role in the economy by facilitating the exchange of funds between investors and borrowers. They provide companies, governments, and individuals with access to capital for investment, expansion, and other financial needs. Financial markets, such as stock markets and bond markets, allow businesses to raise funds by issuing equity or debt, while also providing investors with the opportunity to buy and sell securities. The smooth operation of financial markets helps to allocate resources efficiently, supports economic growth, and ensures liquidity, which is essential for the stability of the financial system.