Credit Market – Features and Functions

Abstract

In developed market economies, financing the operation of enterprises is carried out mainly through the mechanism of financial markets. The financial market is a place where supply and demand for funds are met. Subject to trading on this market is a specific commodity-money. A fee that should be paid on money is interest. Credit markets perform basic economic function of channeling funds from entities that have excess funds to those entities that have a shortage of them, because they are willing to spend more than what they have. In other words, the credit markets perform the function of the allocation of funds in the economy. As savers and borrowers of free funds in the economy usually occur households, but that does not mean that businesses and government (state and local governments) and foreign legal and physical persons do not appear occasionally as economic units, which offer their free capital in the financial market.