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What Is The Difference Between Money Market and Capital Market?

The key differences between money markets and capital markets are: 1. Money markets deal in short-term lending and borrowing of up to 1 year, while capital markets focus on long-term financing of over 1 year. 2. Money markets trade instruments like treasury bills, commercial paper, and certificates of deposit. Capital markets trade stocks, bonds, and other securities. 3. Money markets primarily provide short-term working capital to businesses, while capital markets supply long-term fixed capital for things like land, machinery, and infrastructure projects.

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121 views2 pages

What Is The Difference Between Money Market and Capital Market?

The key differences between money markets and capital markets are: 1. Money markets deal in short-term lending and borrowing of up to 1 year, while capital markets focus on long-term financing of over 1 year. 2. Money markets trade instruments like treasury bills, commercial paper, and certificates of deposit. Capital markets trade stocks, bonds, and other securities. 3. Money markets primarily provide short-term working capital to businesses, while capital markets supply long-term fixed capital for things like land, machinery, and infrastructure projects.

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What is the difference between Money Market and Capital Market?

APARIJITA SINHA

Money market is distinguished from capital market on the basis of the maturity period, credit instruments and the institutions: 1. Maturity Period: The money market deals in the lending and borrowing of short-term finance (i.e., for one year or less), while the capital market deals in the lending and borrowing of long-term finance (i.e., for more than one year). 2. Credit Instruments: The main credit instruments of the money market are call money, collateral loans, acceptances, bills of exchange. n the other hand, the main instruments used in the capital market are stocks, shares, debentures, bonds, securities of the go!ernment. . !ature of Credit Instruments: The credit instruments dealt with in the capital market are more heterogeneous than those in money market. "ome homogeneity of credit instruments is needed for the operation of financial markets. Too much di!ersity creates problems for the in!estors. ". Institutions: #mportant institutions operating in the$ money market are central banks, commercial banks, acceptance houses, nonbank financial institutions, bill brokers, etc. #mportant institutions of the capital market are stock exchanges, commercial banks and nonbank institutions, such as insurance companies, mortgage banks, building societies, etc. #. Purpose of $oan: The money market meets the short-term credit needs of business% it pro!ides working capital to the industrialists. The capital market, on the other hand, caters the long-term credit needs of the industrialists and pro!ides fixed capital to buy land, machinery, etc. %. &isk: The degree of risk is small in the money market. The risk is much greater in capital market. The maturity of one year or less gi!es little time for a default to occur, so the risk is minimised. &isk !aries both in degree and nature throughout the capital market. '. (asic &ole: The basic role of money market is that of li'uidity ad(ustment. The basic role of capital market is that of putting capital to work, preferably to long-term, secure and producti!e employment. ). &elation with Central (ank:

The money market is closely and directly linked with central bank of the country. The capital market feels central bank$s influence, but mainly indirectly and through the money market. *. Market &e+ulation: #n the money market, commercial banks are closely regulated. #n the capital market, the institutions are not much regulated. The key distinguishing feature between the money and capital markets is the maturity period of the securities traded in them

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