Financial Innovation
Abstract
Financial Innovation has been the backbone of our modern financial system. It has revolutionised the way we spend, receive and borrow money, however through the recent global financial crisis and negative connotations that have been attached to the term, people have doubted the positive notions it has had. It is important to distinguish between innovation itself and how it can be used or misused. Recent Financial Innovation has thwarted real economic growth and has been the blame for the recent global financial crisis and having an affect on microeconomic behaviour. The failure for governments to impose strict regulations, such as monetary policy, has had a negative consequence on financial innovation and on the financial system. Although innovation has indeed lead to strong economic performance in times, the meaning of innovation has somewhat been remodeled from one that had a core function of improving efficiency and to promote growth accomplishing broader societal functions to one that is misaligned. Therefore in this essay I discuss why we need financial innovation but why regulation is needed to prevent such economic loss and why enforcement to prevent future economic disasters is needed.
Page 1
Financial Innovation Essay
Exchange traded funds, the growth of venture capital, and easier access to our money, all of these are financial innovations that have had a positive notion on economic growth. However the phrase “financial innovation” has been branded with a negative connotation. In recent times it has faced much scrutiny, so much so that some financiers have come to conclusion that it is an ineffectual concept and that the potential benefits it has are more or less a potential disadvantage to economic growth in the long run. This concept has divided many financiers, where they hold a generalised opinion that the development of new financial instruments have created opportunities for households and companies, and to impose regulations on financial
Financial Innovation has been the backbone of our modern financial system. It has revolutionised the way we spend, receive and borrow money, however through the recent global financial crisis and negative connotations that have been attached to the term, people have doubted the positive notions it has had. It is important to distinguish between innovation itself and how it can be used or misused. Recent Financial Innovation has thwarted real economic growth and has been the blame for the recent global financial crisis and having an affect on microeconomic behaviour. The failure for governments to impose strict regulations, such as monetary policy, has had a negative consequence on financial innovation and on the financial system. Although innovation has indeed lead to strong economic performance in times, the meaning of innovation has somewhat been remodeled from one that had a core function of improving efficiency and to promote growth accomplishing broader societal functions to one that is misaligned. Therefore in this essay I discuss why we need financial innovation but why regulation is needed to prevent such economic loss and why enforcement to prevent future economic disasters is needed.
Page 1
Financial Innovation Essay
Exchange traded funds, the growth of venture capital, and easier access to our money, all of these are financial innovations that have had a positive notion on economic growth. However the phrase “financial innovation” has been branded with a negative connotation. In recent times it has faced much scrutiny, so much so that some financiers have come to conclusion that it is an ineffectual concept and that the potential benefits it has are more or less a potential disadvantage to economic growth in the long run. This concept has divided many financiers, where they hold a generalised opinion that the development of new financial instruments have created opportunities for households and companies, and to impose regulations on financial