Key Concepts in Economics and Finance
Divisions of Economics
Economics is broadly divided into positive and normative economics.
Economic Theory
Economic theory is a science that studies the influence of money in the economic system. It explains facts through:
- Microeconomic Theory: Such as consumer theory.
- Macroeconomic Theory: The study of economic aggregates, units, companies, GDP (PBI), Price Index (Pc).
Economic Policy
Economic policy relates to the decision-making process involving the monetary authority (BCR) and the set of actions the state takes to address specific economic situations.
Economic Factors
Key economic factors include:
- State: (e.g., taxes)
- Businesses: (e.g., sales)
- Families: (e.g., work)
Economic Indicators
Economic indicators are statistical figures that show certain relationships within the economy.
Economic Assets and Money
Economic policies often influence active assets such as money, bonds, and real assets. Money is one of these key assets that helps sustain the economy by facilitating the exchange of goods and services.
Functions of Money
- Means of Payment: Used to perform exchange transactions.
- Measure of Value: Provides an average monetary value for goods and services.
- Unit of Account: Expresses value in a common currency.
Characteristics of Money
- Divisibility
- Recognizability
- Ease of Transport
- Universal Acceptance
- Durability
Properties of Money
- Value Over Time: Reflected in the interest rate.
- Numismatic Value: Value as a collectible item.
Inflation
Inflation is a concept related to the domestic value of the currency.
Balance of Payments
The balance of payments is a systematic record of all economic transactions performed by residents of a country with residents of other countries. Economic transactions are usually bilateral:
- The real flow, which is the entry or exit of goods and services.
- The financial flow, which is the way the real flow is paid for.
The Financial System
The financial system is an organic whole of institutions that generate, capture, manage, guide, and direct both savings and investment within the political-economic context of a country.
Peruvian Financial System
The Peruvian financial system is a set of institutions responsible for the circulation of cash flow. Its main task is to channel money from savers to those who want to make productive investments. These institutions are often called “financial intermediaries” or operate within “financial markets.”
Role of the SBS
The primary objective of the Superintendencia de Banca, Seguros y AFP (SBS) is to preserve the interests of insurers, depositors, and affiliates of the Private Pension System (SPP).
Role of the BCR
The functions of the Banco Central de Reserva del Perú (BCR) include regulating the currency and credit of the financial system, administering international reserves, and fulfilling its statutory functions.
Role of CONASEV
CONASEV (Comisión Nacional Supervisora de Empresas y Valores) promotes market efficiency for securities and collective funds through regulation, supervision, and dissemination of information, building trust and transparency among its participants.
Banking and Financial Institutions
Examples of banking and financial institutions include:
- 15 Private Banks
- 2 Public Banks
- 5 Finance Companies (Financieras)
- 5 Leasing Companies
- 11 Funds Transfer Companies
- 2 Cash Transport, Safekeeping, and Administration Companies (e.g., Hermes and Prosegur)
- 2 Trust Services Companies
- 3 General Warehouses
- 1 Exchange Services Company
- 1 Fund Company
- 1 Factoring Company
Non-Bank Microfinance Institutions
Examples of non-bank microfinance institutions include:
- 11 Municipal Savings and Credit Banks (Cajas Municipales)
- 10 Rural Savings and Credit Banks (Cajas Rurales)
- 14 Micro and Small Enterprise Development Companies (EDPYMES)
- 168 Credit Unions (Cooperativas de Ahorro y Crédito)