Why and when financial instruments are created: a learning story
AbstractThe relationship between financial development and growth has been the subject of intense scrutiny. Economists debate whether finance causes growth [Hicks (1969), Schumpeter (1934)], or whether it is growth that triggers the development of financial markets [Robinson (1952)]. This paper proposes the view that financial development arises as a response to the contractual needs of emerging technologies. Exogenous technological progress generates a derived demand for new financial instruments that facilitate the adoption of the new technologies; those instruments may help investors share risk or overcome private information issues, for example.
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Bibliographic InfoArticle provided by Capco Institute in its journal Journal of Financial Transformation.
Volume (Year): 18 (2006)
Issue (Month): ()
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Technology adoption; financial innovation; learning;
Find related papers by JEL classification:
- G20 - Financial Economics - - Financial Institutions and Services - - - General
- N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
- O30 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - General
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