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Financial Econometrics, Financial Innovation, and Financial Stability

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  • Charles I. Plosser

Abstract

Innovation in financial markets, spurred to a significant extent by developments in finance theory and financial econometrics, has played a critical role in spurring economic growth. However, the current turmoil in financial markets raises fundamental questions about the nature of financial innovation and the role of policymakers in maintaining financial stability. This paper explores these questions, focusing on the complexities of modeling financial risk and the potential trade-off between policies aimed at combating short-run financial instability on the one hand and the potential financial market distortions and moral hazard that can result from such policies on the other. Copyright The Author 2008. Published by Oxford University Press. All rights reserved. For permissions, please e-mail: journals.permissions@oxfordjournals.org., Oxford University Press.

Suggested Citation

  • Charles I. Plosser, 2009. "Financial Econometrics, Financial Innovation, and Financial Stability," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 7(1), pages 3-11, Winter.
  • Handle: RePEc:oup:jfinec:v:7:y:2009:i:1:p:3-11
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    File URL: http://hdl.handle.net/10.1093/jjfinec/nbn014
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    Cited by:

    1. Azimi, Mohammad Naim, 2015. "Modelling the Clustering Volatility of India's Wholesales Price Index and the Factors Affecting it," MPRA Paper 70267, University Library of Munich, Germany.

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