Presented at the Conference on ‘Welfare Effects of Financial Innovation’ in honour of Nout Wellink held on 11 November 2011. I am grateful to the discussant William White and to other conference participants for very helpful comments. I also thank the editor, John A. Doukas.
Trends in Financial Innovation and their Welfare Impact: an Overview
Version of Record online: 21 AUG 2012
© 2012 Blackwell Publishing Ltd
European Financial Management
Volume 18, Issue 4, pages 493–514, September 2012
How to Cite
Allen, F. (2012), Trends in Financial Innovation and their Welfare Impact: an Overview. European Financial Management, 18: 493–514. doi: 10.1111/j.1468-036X.2012.00658.x
- Issue online: 21 AUG 2012
- Version of Record online: 21 AUG 2012
- dark side;
- financial crises;
- private equity
There is evidence that financial innovations are sometimes undertaken to create complexity and exploit the purchaser. Thus financial innovation does have a dark side. As far as the financial crisis is concerned, securitisation and subprime mortgages may have exacerbated the problem. However, financial crises have occurred in a very wide range of circumstances, where these and other innovations were not important. There is evidence that financial liberalisation has been more of a problem. There are many financial innovations that have had a significant positive effect including venture capital and leveraged buyouts and innovations to fund environmental and health improvements.