FINANCIAL INNOVATION AND MONETARY POLIC
UNIVERSITY OF NAIROBI
SCHOOL OF BUSINESS – KISUMU CAMPUS
COLLEGE OF HUMANITIES AND SOCIAL STUDIES
DEPARTMENT OF BUSINESS ADMINISTRATION
COURSE: FINANCIAL INSTITUTIONS AND MARKETS
COURSE CODE: DFI 503
LECTURER: MR OMORO
PRESENTED BY:
NGOME GIDEON BETI D61/61983/2013
MUOKI SHADRACK KIALA D61/65721/2013
TSISAGA MERCY ALEYO D61/69599/2013
ANNE GICHIU D61/65838/2013
OWIDI GABRIEL ODONGO D61/68108/2013
JAMILLAH KHAVAYI D61/69241/2013
SEMESTER: MAY TO AUGUST 2014.
TASK: FINANCIAL MARKETS AND MACROECONOMIC POLICY II
FINANCIAL INNOVATION AND MONETARY POLICY
FINANCIAL INNOVATIONS
Innovation is the introduction of a new product to a market or the production of an existing one in a new manner. Financial innovations occur because market participants are constantly searching for new ways to make greater profits.
The process of financial innovation includes changes in financial instrument institutions, practices and markets. In broad sense financial innovation affects the nature and composition of monetary aggregates through new financial instruments or changes in old instruments as well as the term and conditions of debt or credit arrangements
Innovations can be grouped by a functional basis aggressive or defensive. Aggressive innovation is the introduction of a new product or process in response to perceived demand. A very large part of innovation since at least the late 1970’s is aggressive innovation in the literature. Defensive innovation is response to changed environment or transaction cost.
Financial innovations lower the transaction cost of transferring funds from lower yielding money balances to higher yielding alternatives. Therefore with financial innovation market participants attempt to minimize risk and to maximize return.
As financial innovation is a continuous process, it is difficult, in practice, to grasp all of its contours; and even more difficult to predict its consequences. Therefore, financial innovation adds an
SCHOOL OF BUSINESS – KISUMU CAMPUS
COLLEGE OF HUMANITIES AND SOCIAL STUDIES
DEPARTMENT OF BUSINESS ADMINISTRATION
COURSE: FINANCIAL INSTITUTIONS AND MARKETS
COURSE CODE: DFI 503
LECTURER: MR OMORO
PRESENTED BY:
NGOME GIDEON BETI D61/61983/2013
MUOKI SHADRACK KIALA D61/65721/2013
TSISAGA MERCY ALEYO D61/69599/2013
ANNE GICHIU D61/65838/2013
OWIDI GABRIEL ODONGO D61/68108/2013
JAMILLAH KHAVAYI D61/69241/2013
SEMESTER: MAY TO AUGUST 2014.
TASK: FINANCIAL MARKETS AND MACROECONOMIC POLICY II
FINANCIAL INNOVATION AND MONETARY POLICY
FINANCIAL INNOVATIONS
Innovation is the introduction of a new product to a market or the production of an existing one in a new manner. Financial innovations occur because market participants are constantly searching for new ways to make greater profits.
The process of financial innovation includes changes in financial instrument institutions, practices and markets. In broad sense financial innovation affects the nature and composition of monetary aggregates through new financial instruments or changes in old instruments as well as the term and conditions of debt or credit arrangements
Innovations can be grouped by a functional basis aggressive or defensive. Aggressive innovation is the introduction of a new product or process in response to perceived demand. A very large part of innovation since at least the late 1970’s is aggressive innovation in the literature. Defensive innovation is response to changed environment or transaction cost.
Financial innovations lower the transaction cost of transferring funds from lower yielding money balances to higher yielding alternatives. Therefore with financial innovation market participants attempt to minimize risk and to maximize return.
As financial innovation is a continuous process, it is difficult, in practice, to grasp all of its contours; and even more difficult to predict its consequences. Therefore, financial innovation adds an
References: 1. Alesina, A. and Ardagna, S. (1998), “Tales of Fiscal Adjustment,” Economic Policy, 27, 487–545. 2. United Nations (2010). World Economic Situation and Prospects 2010. New York: United Nations. 3. UNCTAD (2009). Economic Development in Africa 2009: Strengthening regional economic integration for Africa’s development. United Nations publication. Sales No. E-96.II.D.3. New York and Geneva.