- January 22, 2016
- Posted by: Berg Devien
- Category: Finance & accounting
Financial markets in each country will be divided into two groups:
Capital market have instruments with maturity of more than one year and also instruments traded with no maturity like stocks.
The market trade instruments with maturity of up to one year. Money market initially established to maintain the liquidity and it was interpreted as a safe place to store and protect money against the theft. But with the world improvement, governments have learned that may use banks as a means of reducing the demand for goods and services. Thus began to preach absorb excess liquidity of the people in the bank accounts, and thereby reduce liquidity in the hands of people and control them. And to prevent the sudden spread of this huge amount of liquidity to commodity markets and thus, to control the demand and eventually inflation of goods and services in market. In the other hand, the money accumulated in their bank accounts could be used for loans and credits to productive sectors of societies and increase production.