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In Defense of Much, but Not All, Financial Innovation

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  • Litan, Robert E.

    (Kauffman Foundation)

Abstract

After decades of being celebrated as one of the hallmarks and virtues of American-style capitalism, "financial innovation" has come onto hard times. Soon after the financial crisis began in 2007 and 2008, certain instruments of recent high finance--the collateralized debt obligation (CDO) and the credit default swap (CDS), as leading examples--were blamed by the media, the public, many policymakers, and even by some top economists for nearly bringing the U.S. and global financial systems and their economies to their knees. It didn't take long for financial innovation more broadly to be condemned.

Suggested Citation

  • Litan, Robert E., 2010. "In Defense of Much, but Not All, Financial Innovation," Working Papers 10-06, University of Pennsylvania, Wharton School, Weiss Center.
    • Handle: RePEc:ecl:upafin:10-06
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    File URL: http://fic.wharton.upenn.edu/fic/papers/10/10-06.pdf
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    Cited by:

    1. Nizar, Muhammad Afdi, 2019. "Baik-Buruk Inovasi Keuangan [Financial Innovation : The Good and the Bad Sides]," MPRA Paper 97921, University Library of Munich, Germany.
    2. Estrada, Gemma & Park, Donghyun & Ramayandi, Arief, 2010. "Financial Development and Economic Growth in Developing Asia," ADB Economics Working Paper Series 233, Asian Development Bank.
    3. Neil Fligstein, 2021. "Innovation and the theory of fields," AMS Review, Springer;Academy of Marketing Science, vol. 11(3), pages 272-289, December.
    4. Chambers, David & Esteves, Rui, 2014. "The first global emerging markets investor: Foreign & Colonial Investment Trust 1880–1913," Explorations in Economic History, Elsevier, vol. 52(C), pages 1-21.
    5. Henderson, Brian J. & Pearson, Neil D. & Wang, Li, 2020. "Pre-trade hedging: Evidence from the issuance of retail structured products," Journal of Financial Economics, Elsevier, vol. 137(1), pages 108-128.
    6. Heikki Marjosola, 2021. "The problem of regulatory arbitrage: A transaction cost economics perspective," Regulation & Governance, John Wiley & Sons, vol. 15(2), pages 388-407, April.

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