Knowledge, Technology Adoption and Financial Innovation

Fernandes, Ana (June 2005). Knowledge, Technology Adoption and Financial Innovation (Discussion Papers 05-13). Bern: Department of Economics

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Why are new financial instruments created? This paper proposes the view that financial development arises as a response to the contractual needs of emerging technologies. Exogenous technological progress generates a demand for new financial instruments in order to share risk or overcome private information, for example. A model of the dynamics of technology adoption and the evolution of financial instruments that support such adoption is presented. Early adoption may be required for financial markets to learn the technology; once learned, financial innovation boosts adoption further. Financial learning emerges as a source of technological diffusion. The analysis identifies a causality link from technology to growth which is nonetheless consistent with empirical findings of a positive effect of current financial development on future growth.

Item Type:

Working Paper

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics

UniBE Contributor:

Fernandes, Ana

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

Series:

Discussion Papers

Publisher:

Department of Economics

Language:

English

Submitter:

Lars Tschannen

Date Deposited:

02 Oct 2020 11:06

Last Modified:

02 Oct 2020 11:06

JEL Classification:

G20, N20, O30

BORIS DOI:

10.7892/boris.145676

URI:

https://boris.unibe.ch/id/eprint/145676

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