Financial Intermediation
The **money markets** is a crucial component of the global financial system. Here’s a brief overview:
1. **Definition**: The money market deals with **short-term** funds, typically for periods of a year or less³.
2. **Participants**:
– **Banks**: Engage in overnight swaps and short-term lending.
– **Financial Institutions**: Conduct wholesale transactions.
– **Companies**: Borrow and lend funds.
3. **Purpose**: Facilitate lending and borrowing on a short-term basis, distinct from the capital market that focuses on medium- and long-term credit⁴.
In summary, the money market ensures liquidity and efficient allocation of short-term funds.
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