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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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  1. Levine, Ross & Zervos, Sara, 1998. "Stock Markets, Banks, and Economic Growth," American Economic Review, American Economic Association, vol. 88(3), pages 537-58, June.
  2. Saint-Paul, Gilles, 1992. "Technological choice, financial markets and economic development," European Economic Review, Elsevier, vol. 36(4), pages 763-781, May.
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  5. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
  6. Greenwood, Jeremy & Jovanovic, Boyan, 1990. "Financial Development, Growth, and the Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1076-1107, October.
  7. 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.
  8. Paul Milgrom & Nancy L.Stokey, 1979. "Information, Trade, and Common Knowledge," Discussion Papers 377R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Boyan Jovanovic & Peter L. Rousseau, 2001. "Why Wait? A Century of Life Before IPO," NBER Working Papers 8081, National Bureau of Economic Research, Inc.
  10. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
  11. Raghuram G. Rajan & Luigi Zingales, . "Financial Dependence and Growth," CRSP working papers 344, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
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Cited by:
  1. Marta González & Josep Pijoan-Mas, 2005. "The Flat Tax Reform: A General Equilibrium Evaluation For Spain," Working Papers wp2005_0505, CEMFI.
  2. Aleix Calveras & Juan-José Ganuza & Gerard Llobet, 2005. "Regulation And Opportunism: How Much Activism Do We Need?," Working Papers wp2005_0508, CEMFI.
  3. Díaz-Giménez, Javier & Pijoan-Mas, Josep, 2006. "Flat Tax Reforms in the US: A Boon for the Income Poor," CEPR Discussion Papers 5812, C.E.P.R. Discussion Papers.
  4. Elizalde, Abel & Repullo, Rafael, 2004. "Economic and Regulatory Capital: What is the Difference?," CEPR Discussion Papers 4770, C.E.P.R. Discussion Papers.
  5. Beatriz Dominguez & Juan-José Ganuza & Gerard Llobet, 2006. "R&D In The Pharmaceutical Industry: A World Of Small Innovation," Working Papers wp2006_0601, CEMFI.
  6. Jose Ceron & Javier Suarez, 2006. "Hot And Cold Housing Markets: International Evidence," Working Papers wp2006_0603, CEMFI.

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