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Knowledge, Technology Adoption And Financial Innovation

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  • Ana Fernandes

    ()
    (CEMFI, Centro de Estudios Monetarios y Financieros)

Abstract

Why are new financial instruments created? Why are they needed and what purpose do they serve? This paper proposes the view that financial development arises as a response to the contractual needs of emerging technologies. Exogenous technological progress generates a demand for new financial instruments in order to share risk or overcome private information, for example. A model of the dynamics of technology adoption and the evolution of financial instruments that support such adoption is presented. Early adoption may be required for financial markets to learn the technology; once learned, financial innovation boosts adoption further. An implication of the analysis is the notion that financial development promotes economic growth only to the extent that it enhances the adoption of new technologies.

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Bibliographic Info

Paper provided by CEMFI in its series Working Papers with number wp2004_0408.

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Date of creation: Apr 2004
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Handle: RePEc:cmf:wpaper:wp2004_0408

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Keywords: Technology adoption; financial innovation; learning.;

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References

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  1. Jeremy Greenwood & Boyan Jovanovic, 1989. "Financial Development, Growth, and the Distribution of Income," NBER Working Papers 3189, National Bureau of Economic Research, Inc.
  2. Raghuram G. Rajan & Luigi Zingales, 1996. "Financial Dependence and Growth," NBER Working Papers 5758, National Bureau of Economic Research, Inc.
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  5. Saint-Paul, Gilles, 1992. "Technological choice, financial markets and economic development," European Economic Review, Elsevier, vol. 36(4), pages 763-781, May.
  6. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
  7. Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series 1678, The World Bank.
  8. Boyan Jovanovic & Peter L. Rousseau, 2001. "Why Wait? A Century of Life before IPO," American Economic Review, American Economic Association, vol. 91(2), pages 336-341, May.
  9. Acemoglu, Daron & Zilibotti, Fabrizio, 1997. "Was Prometheus Unbound by Chance? Risk, Diversification, and Growth," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 709-51, August.
  10. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November.
  11. Bencivenga, Valerie R & Smith, Bruce D, 1991. "Financial Intermediation and Endogenous Growth," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 195-209, April.
  12. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
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Cited by:
  1. Javier Diaz-Gimenez & Josep Pijoan-Mas, 2006. "Flat Tax Reforms in the U.S.: a Boon for the Income Poor," Computing in Economics and Finance 2006 400, Society for Computational Economics.
  2. Aleix Calveras & Juan-José Ganuza & Gerard Llobet, 2005. "Regulation And Opportunism: How Much Activism Do We Need?," Working Papers wp2005_0508, CEMFI.
  3. Beatriz Dominguez & Juan-José Ganuza & Gerard Llobet, 2006. "R&D In The Pharmaceutical Industry: A World Of Small Innovation," Working Papers wp2006_0601, CEMFI.
  4. Ceron, Jose A. & Suarez, Javier, 2006. "Hot and Cold Housing Markets: International Evidence," CEPR Discussion Papers 5411, C.E.P.R. Discussion Papers.
  5. Marta González & Josep Pijoan-Mas, 2005. "The Flat Tax Reform: A General Equilibrium Evaluation For Spain," Working Papers wp2005_0505, CEMFI.
  6. Abel Elizalde & Rafael Repullo, 2004. "Economic And Regulatory Capital. What Is The Difference?," Working Papers wp2004_0422, CEMFI.

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