International Banks in the Money Market

Abstract

The objective of this paper is to determine the international banks' economic impact on the Money Market. In order to do this one must first understand the Money Market instruments, participants, and how the U.S. and international banks fit into the picture. In addition to the research I have done explaining facts of the Money Market, I have included information gathered from personal work experience with an international bank's Money Market operations. As a result of research and experience, it can be determined that T-Bills are the largest and safest Money Market instrument. They do, however, offer the lowest interest rates. Commercial Paper is the second largest and offers higher interest rates than the T-Bill. The Eurodollar, which offers the highest interest rates, often has the most risk. Commercial banks and corporations are the largest participants in the Money Market and the Federal Reserve determines the level for the rates with the use of Federal Funds. The U.S. international financing market is the most dominant in the world. But recently, West Germany's appreciating deutschemark and increasing investment abroad and Japan's internationalization of the yen and investment abroad pose a serious threat to the U.S. dominance in the international financial markets.