Money market is a short-term capital market, which refers to the financial market with a financing period of less than one year and is an important part of the financial market. Because the financial instruments contained in this market are mainly short-term credit instruments issued by the government, banks and industrial and commercial enterprises, with the characteristics of short term, strong liquidity and low risk, it is called "quasi-currency" after cash currency and deposit currency in the level of money supply, so this market is called "money market".
An efficient money market should be a market with breadth, depth and flexibility, with large market capacity, fast information flow, low transaction cost and active and continuous trading, which can attract many investors and speculators to participate. The money market consists of four sub-markets: interbank lending market, bill discount market, negotiable certificates of deposit market and short-term securities market.
As far as its structure is concerned, the money market includes interbank lending market, bill discount market, treasury bill market and securities repurchase market.
The initial motive force for the emergence and development of money market is to maintain the liquidity of funds. It connects the capital demanders with the capital suppliers through various short-term financing tools, which not only meets the short-term capital demand of the capital demanders, but also provides opportunities for the temporarily idle funds of the capital surplus to gain profits.
But this is only the superficial function of the money market. If we put the money market into the financial market and even the market economy, we can find that the function of the money market is far more than that. The money market not only provides flexible management means for banks and enterprises from the micro level, making it more convenient and flexible to manage the security, liquidity and profitability of funds in a unified way, but also provides means for the central bank to implement monetary policy to regulate the macro-economy, which has played a great role in ensuring the development of the financial market.
Under the condition of market economy, there are objectively two kinds of economic actors, namely, capital surplus and capital shortage, which can be divided into two categories: long-term capital surplus and capital shortage for more than one year and short-term capital surplus and capital shortage for less than one year. Compared with the capital market, the money market provides services for the supply and demand of medium and long-term funds, and provides a feasible way for the financing of seasonal and temporary funds.
Compared with long-term investment capital demand, short-term and temporary capital demand is the most basic and frequent capital demand of microeconomic actors. Because of frequent daily economic activities, short-term temporary and seasonal capital shortage is inevitable and frequent. If this capital gap can't be made up, even the simple reproduction of society can't be maintained, or the commodity economy can only be at the primary level. The function of short-term capital financing is a basic function of money market.