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Financing Future Growth: The Need for Financial Innovations

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  • Zvi Bodie
  • Marie Brière

Abstract

Attracting long-term investors from the private sector or in public-private partnerships for stable long-term investment in the innovative sectors and industries needed to generate sustained growth is crucial. Long-term investors want assets that generate regular cash flows, often linked to inflation. While equities seem today less appropriate for long-term investors’ needs, particularly in the context of the recent regulatory changes, inflation-linked bonds, very-long dated conventional bonds, project bonds or specific derivatives better meet their requirements. It seems highly likely that the expansion and increasing regulation of long-term investors in both developed and emerging countries will trigger the development of new financial instruments compatible with long-term investment. While long-term investors are the natural sources of growth financing, they are not necessarily capable of assuming all the associated risks. Establishing and/or developing national or supranational institutions that can partly assume or at least structure some of these risks and thus offer end-investors the products they need is therefore essential. Strict regulation of the new markets arising from this process will also be vital.

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File URL: http://dx.doi.org/10.1787/fmt-2011-5kg55qw0v76f
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Bibliographic Info

Article provided by OECD Publishing in its journal OECD Journal: Financial Market Trends.

Volume (Year): 2011 (2011)
Issue (Month): 1 ()
Pages: 141-144

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Handle: RePEc:oec:dafkad:5kg55qw0v76f

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