What is Money Market? – Economy Online

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The money market is responsible for financing the financial system. Basically, it is a grouping of institutions that lend money to each other. The specificity of these loans is a short maturity. One year is officially stated, but it is practically 13 months due to maturity.

In order for the financial system to survive, it is necessary to distribute money in it. We can imagine it as a web in which the Czech National Bank is located and banks are closest to it. They then lend money to other money market entities. It is quite common for one bank to lend to another.

 

Where to take money from loans and mortgages

Where to take money from loans and mortgages

If you have ever wished, where the bank takes money for loans and mortgages, it is thanks to the money market. They will lend you 10% interest and borrow themselves from the Czech National Bank for less interest. In doing so, the CNB sets out the attacks it lends and can thus regulate the financial system. The money market is therefore its tool to influence the economy in the Czech Republic. The CNB mainly uses this to influence the amount of money in circulation.

It also has the task of shifting short-term free capital that the financial institution can accumulate. Through the money market , one bank can lend money to another and not keep it on the bill. With large amounts of money held by only one entity, this could be a problem for the economy.

 

Loans for bills

Loans for bills

The money market trades in commercial, financial and securities loans (bills of exchange, checks, short-term government bonds, government bonds, government bonds, contracts, and more). At the same time, the securities must have low interest, low risk and, above all, high liquidity so that they can be traded very quickly.

Outside the banks, large companies that have accumulated large amounts of money can also hit the money market . Rather, they are corporations. These can be issued through the bank (on its behalf) to trade exchanges for their free money.