Introduction Money market is like a place for large institutions and government to manage their short-term cash needs. However, individual investors have access to the market through a variety of different securities. Money market securities are essentially IOUs issued by governments, financial institutions and large corporations.
For example, a retail bank branch can be considered as a retail location for the money market. The bank branch can allow the investor to purchase a bond or invest in a deposit. Similarly, websites like TreasuryDirect (US Government) which sell government securities and treasury bills are also considered as a channel of the money market.
According to S.N. Sen, “The larger the number of sub-markets, the broader and more developed will be the structure of the money market”. For example, the New York money market has commercial paper market, banker’s acceptance market, certificates of deposit market, Treasury bill market, Federal funds market, repurchase agreements market, etc.
The government will then try to replace the free market by supplying goods and service themselves so the market does not fail and one way in which they can do this, is through the use of taxes and subsidies. Many economists use these as they achieve greater social efficiency. When the market is imperfect, the social efficiency will not be achieved.
Definition: Banks and financial institutions use the money market to borrow and lend large sums of money.The term “money market” doesn’t imply that there is a formal market. Instead, it refers to a group of brokers, dealers, banks, and other market participants who transact with each other on a regular basis.
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