Abstract

The article is devoted to the research of theoretical principles of development of such components of the financial market as the money market and the capital market, identification of key differences between them on the basis of the analysis of scientific professional literature and key provisions of the legislative framework, substantiation of the general interpretation of their essence that could be used in international practice. The article analyzes the peculiarities of formation and functioning of each type of markets, traditional differences between them, examines international practice and statistics on the use of these terms by economic agents, defines the legal basis for understanding their essence and the legal basis for the delineation of these two types of markets. It is proved that a thorough analysis of the peculiarities of the functioning of individual markets, the frequency and popularity of the use of their definitions in economic practice, the definition of users of these types of markets and their functions, form the prerequisites for clarifying the definitions of the essence of each of these markets, with their further global harmonization. The result of the research is the authors’ own interpretations of the concepts of “money market” and “capital market”. The money market offers an understanding of the transaction system for the purchase and sale of liquid cash or other short-term financial assets, which typically include short-term financial liabilities (up to one year), the purpose of which is usually to provide financing for current operations, short-term profit or financial risk management in the short-term. The capital market is defined in the article as a system of transactions for the purchase and sale of financial assets, which include securities, derivatives or financial transactions, which usually involve long-term financial liabilities, the purpose of which is to satisfy capital requirements or increase capital.

Keywords: money market; capital market; financial market; legal basis; international practice, definitions.

JEL Classification: A11, G15, O16.

Cite as: Wieland, I., Kovács, L., Savchenko, T. (2020). The distinctive aspects of financial markets. Financial Markets, Institutions and Risks, 4(1), 51-59. http://doi.org/10.21272/fmir.4(1).51-59.2020.

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