The impact of stock market functioning on ensuring the stability of a country’s financial system

Abstract

The stock market is a key component of the modern financial system, providing capital mobilization and promoting economic growth. However, stock market instability can trigger financial crises and pose threats to the national economy. Considering this, it is important to investigate the impact of stock market functioning on the stability of a country’s financial system. This article examines the influence of stock market operations on the stability of the state’s financial system. The role of the stock market in ensuring effective capital allocation, increasing investment activity, and forming financial stability is analyzed. Both positive and negative factors affecting market stability are identified. The purpose of this study is to conduct a comprehensive analysis of the impact of stock market functioning on ensuring the stability of the country’s financial system and to identify key factors determining this influence. Methods. The study employs methods of system analysis, comparative analysis, and generalization of theoretical concepts. Statistical data on stock market dynamics and financial stability, as well as an analysis of the regulatory framework, were used. Results. The research showed that a stable stock market contributes to increased investment activity and effective capital allocation, positively influencing the resilience of the financial system. At the same time, high volatility and speculative processes may threaten financial stability, emphasizing the need to strengthen regulatory mechanisms. Conclusions. The functioning of the stock market significantly impacts the stability of the country’s financial system. To minimize risks and ensure sustainable development, it is necessary to enhance market transparency, improve legislative regulation, and promote financial literacy among market participants.