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Schumpeterian innovations, financial innovations and instability: An institutional perspective

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  • Faruk Ülgen

    (Associate Professor of Economics, Head of the Branch Campus of Valence, Centre de Recherche en Economie de Grenoble (CREG), Faculty of Economics – University Grenoble Alpes, 1241, rue des Résidences BP47, 38040 Grenoble Cedex 9, France)

Abstract

This paper seeks to assess the nature of financial innovations as regards the economic stability throughout an institutional framework within the Schumpeterian tradition. While in the Schumpeterian evolutionary process entrepreneurial innovations are assumed to lead the entire economy towards economic development, financial innovations do not obviously generate the same positive outcome for economic evolution. To point to the ambiguous nature of financial innovations the paper suggests a monetary interpretation of Schumpeterian capitalist dynamics and sheds light on the role of the institutional environment to ensure viable economic development. It then argues that in highly liberalized environment, unconstrained financial dynamics may lead to system-wide crises and make public regulatory schemes necessary for the sake of systemic stability.

Suggested Citation

  • Faruk Ülgen, 2015. "Schumpeterian innovations, financial innovations and instability: An institutional perspective," Cuadernos de Economía - Spanish Journal of Economics and Finance, Asociación Cuadernos de Economía, vol. 38(106), pages 46-53, Abril.
    • Handle: RePEc:cud:journl:v:38:y:2015:i:106:p:46-53
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    Keywords

    Financial innovations. Financial instability. Monetary economy. Regulation. Schumpeterian innovations.;

    JEL classification:

    • B25 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Historical; Institutional; Evolutionary; Austrian; Stockholm School
    • G01 - Financial Economics - - General - - - Financial Crises
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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