Financial Reforms and Innovation: A Micro-Macro Perspective (original) (raw)

Financial innovation: theoretical issues and empirical evidence in Italy and in the UK

International Review of Economics, 2009

Financial innovation in banking has been a relevant topic since mid '70s. Nowadays, also due to the present financial systems situation, it comes to further relevance. In the first part of the paper, we try to clearly identify the phenomenon and draw a general framework. Despite the relevance of financial innovation, a unique definition is hard to find. We then provide empirical evidence of such innovations on a sample of European listed banks (Euronext, London Stock Exchange and Borsa Italiana) over the period 2005-2008 using annual reports information. First the absence of mentions of a specific organizational unit in charge of research and development is highlighted. However, the existence of an R&D function involving different organizational units cannot be excluded. Second, innovation seems to be mainly concentrated in the product area, in all stock exchanges considered. This could be accounted for by the difference in the "life cycles" of innovations and by the different operational conditions of banks in all systems. Third, larger banks seem more innovative. No clear relation between innovation and cost reduction/revenue increase seems to exist instead, in all countries. In the light of the above considerations, policy implication comes to light, on whether the choice of not establishing a specific organizational unit dedicated to R&D could turn out effective in the medium-long term.

Innovation changes and the traditional financial sector

Humanities & Social Sciences Reviews, 2022

Purpose of the study: The main objectives of this work are to analyze the innovation process in general and financial Innovation in particular, during which potential effects will appear on the financial structures of economic units and considering the recent financial events of the crisis of the subprime discuss whether financial Innovation is a source of growth or, on the contrary, is a source of financial instability. Methodology: The financial crisis has cast a shadow over recent financial innovations, particularly those that call for risk elimination. This research used secondary methods for innovation changes and traditional financial sectors. The secondary research method will collect data through google, websites, books, and other sources. Main findings: The main goal of financial technologies offered by entities in this sector is to improve the efficiency and availability of financial services, both from the customer and the perspective and a financial institution. The digi...

Theorems and Theories of Financial Innovation: Models and Mechanism Perspective

Innovation is basic need of the hour to attract new customers to the financial markets. "Financial Innovation" means finding new products and new features for existing financial products. Thus creating a new financial product or adding new features to existing financial product is the central theme of financial engineering. Hence, the innovative products should try to reduce financial risk and it should aim to reach "financial optimization". Innovation is mainly driven by modern Globalization and investors and government resulting in exposing to new and wider international risk, innovation becomes a new tool to solve, manage and transfer the entire extra burden. The deregulation of banking systems, in particular, promotes economic growth through improved allocation, efficiency and a reduction of financial service costs.

Innovation and financial liberalization

2014

This paper attempts to shed some light on the role of financial sector policies in generating new knowledge, drawing on the experience of one of the fastest growing and largest developing countries. Using time series data for India over the period 1963–2005, the results indicate that interest rate restraints help generate ideas. Other financial repressionist policies, in the form of high reserve and liquidity requirements, as well as significant directed credit controls, appear to have a dampening effect on ideas production. These results lend some support to the argument that some form of financial sector reforms may help stimulate economic growth via increasing technological innovation.

Central banking and financial innovation. A survey of the modern literature

2012

We review the literature regarding the impact of financial innovation on the monetary transmission mechanism and on the way the central bank can achieve its ultimate goal, that is to control the price level. We argue that, although the form of central bank instruments and current methods for implementing monetary policy may change, the goals that the policy makers try achieve by employing these instruments remain valid, and achievable. JEL Codes: E42, E58, E31, E51, E52

Banking deregulation and innovation

Journal of Financial Economics, 2013

We document empirical support for a key micro-level channel-innovation by young, private firms-through which financial sector deregulation affects economic growth. We find that intrastate banking deregulation, which increased the local market power of banks, decreased the level and risk of innovation by young, private firms. In contrast, interstate banking deregulation, which decreased the local market power of banks, increased the level and risk of innovation by young, private firms. These contrasting effects on innovation also translated into contrasting effects on economic growth. Our study suggests that the nature of financial sector deregulation crucially affects its potential benefits to the real economy.

Central Banking and Financial INNOVATION1

2002

Summary We review the literature regarding the impact of financial innovation on the monetary transmission mechanism and on the way the central bank can achieve its ultimate goal, that is to control the price level.We argue that, although the form of central bank instruments and current methods for implementing monetary policy may change, the goals that the policy makers try to achieve by employing these instruments remain valid, and achievable.