Essay - Identifying and Analyzing Money Markets the Transmission Mechanism of the...

Identifying and Analyzing Money Markets

The transmission mechanism of the monetary policy on the economy has been evaluated by numerous researchers ***** ***** been discovered to play vital role within economic policy as it affects further on each household and the changes in the monetary ***** ***** thus ***** money markets in one country lead ***** immediate changes in other linked markets through the globalization which has occurred and is increasing its' prevalence even in the most remote countries of ***** world. The purpose of th***** study is to identify *****e money *****, the indicators stating *****ir developments, trace the shift in these ********** for the US money markets and ***** affect they had on economy and are likely to have in the near future. The relevant studies of some scholars have ***** used as theoretical bas***** for the subject study.

Money market is a "subsection of fixed income market" and ********** with capital ***** is a part of each country and global financial markets. The lenders or net savers within each economic system, ***** households, firms, government and non-residents, lend their funds to the direct finance markets, or ***** and capital *****, ***** ***** transfer them to the borrowers or net spenders, who are namely firms, also government, ***** or non-residents. Sometimes indirect finance intermediaries, such as credit institutions, mo*****ary ***** institutions take active ***** within th***** *****. ***** money market is different from o*****er financial *****s is that is works only with very short-term, typically ***** maturity less than one year which makes this market often being referred ***** ***** cash investments, as opposite to bonds market. The m*****y market is characterized by very large volumes of the transactions as it is typically a "*****lesale interbank *****." ***** securities, or ***** financial instruments w*****ked with in the money markets are Tre*****ury Bills (government securities with maturity less than one year), Certificates of Deposit (short period deposit with a b*****nk), Commercial Papers (non secured loan *****sued by a company with ***** maturity, while the returns on these papers are higher compared with those on Treasury bills as there is r*****k for the corporation to default), Banker's Acceptances ("short-term credit *****vestment created ***** a non-***** firm and guaranteed by a b*****nk to make payment"), Eurodollars (*****s in US currency but in banks located outside the *****A, typically with maturity of less ***** six months) and Repos (agreements of an inves*****r holding governmental *****, typically ***** ***** to sell to a lender ********** repurch*****e them back at an agreed d*****e and price).

***** securities are ***** liquid ***** are considered a very s*****fe investment, while offering rather low comparing with other financial instruments rates of returns. As the transaction volumes are very large, the optimal path ***** a private investor to enter ***** market is through monetary mutual fund. The money market experiences the fastest effect of any ***** in the government policy and *****s ***** to ***** rest of the economy, ***** pushing upwards the importance of transparency and efficiency