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Financial Innovations and Economic Fluctuation from the Present Perspective
[Finanční inovace a hospodářské výkyvy v současné perspektivě]

Author

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  • Martin Janíčko

Abstract

Financial innovations should be regarded as a substantial element in the functioning of modern economies and financial sectors. However, their general impact is to be assessed from the present perspective, essentially depending on their particular behaviour and the role they play in the economy. Most importantly, this text follows both the Post-Keynesian and the Regulation School logic, trying to clarify business cycle volatility with respect to the intensity of innovative activities in the financial sector. The article also discusses some hypothetical causal relationships between the 2007-2008 financial and economic crisis and financial innovation activities, largely accelerated in intensity over the preceding two decades. As it is clearly demonstrated, the "Great Moderation" argument has not been entirely confirmed and a number of mainstream economists have ultimately been forced to adjust their respective approaches towards the functioning of modern economies.

Suggested Citation

  • Martin Janíčko, 2012. "Financial Innovations and Economic Fluctuation from the Present Perspective [Finanční inovace a hospodářské výkyvy v současné perspektivě]," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2012(6), pages 18-33.
    • Handle: RePEc:prg:jnlaop:v:2012:y:2012:i:6:id:385:p:18-33
    DOI: 10.18267/j.aop.385
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    References listed on IDEAS

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    1. Gertler, Mark & Kiyotaki, Nobuhiro, 2010. "Financial Intermediation and Credit Policy in Business Cycle Analysis," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 11, pages 547-599, Elsevier.
    2. Bezemer, D.J., 2009. "No one saw this coming. Understanding financial crisis through accounting models," Research Report 09002, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    3. Miller, Merton H., 1986. "Financial Innovation: The Last Twenty Years and the Next," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 21(4), pages 459-471, December.
    4. Martin H. Wolfson, 1996. "A Post Keynesian Theory of Credit Rationing," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 18(3), pages 443-470, March.
    5. Robert E. Lucas Jr., 2003. "Macroeconomic Priorities," American Economic Review, American Economic Association, vol. 93(1), pages 1-14, March.
    6. Bezemer, Dirk J, 2009. "“No One Saw This Coming”: Understanding Financial Crisis Through Accounting Models," MPRA Paper 15892, University Library of Munich, Germany.
    7. Baskin,Jonathan Barron & Miranti, Jr,Paul J., 1997. "A History of Corporate Finance," Cambridge Books, Cambridge University Press, number 9780521555142, October.
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    9. Harold G. Fraine & Robert H. Mills, 1961. "Effect Of Defaults And Credit Deterioration On Yields Of Corporate Bonds," Journal of Finance, American Finance Association, vol. 16(3), pages 423-434, September.
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    More about this item

    Keywords

    financial innovations; business cycle amplitude; Post-Keynesian economics; Regulation School;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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