Set of institutions, conventions, and practices whose aim is to facilitate the lending and borrowing of money on a short-term basis.
The money market is, therefore, different from the capital market, which is concerned with medium-and long-term credit . The transactions that occur on the money market involve not only banknotes but assets that can be turned into cash at short notice, such as short-term government bills of exchange . Though the details and mechanism of the money market vary greatly from country to country, in all cases its basic function is to enable those with surplus short-term funds to lend and those with the need for short-term credit to borrow. This function is accomplished through middlemen who provide their services for a profit. In most countries the government plays a major role in the money market, acting both as a lender and borrower and often using its position to influence the money supply and interest rates according to its monetary policy . The U.S. money market covers financial instruments ranging from bills of exchange and government securities to funds from clearinghouses and certificates of deposit . In addition, the {{link=Federal Reserve System">Federal Reserve System provides considerable short-term credit directly to the banking system. The international money market facilitates the borrowing, lending, and exchange of currencies between countries.