Advantages include; the creation of new securities, creation of new markets and financial institutions and the economic growth. The creation of new securities provides the investors with new avenues to invest in and it injects fresh capital which in turn leads towards increased employment opportunities. The disadvantages include; use of financial innovation for deceptive purposes such as off balance sheet financing and the creation of special purpose vehicles. The paper discusses two cases related to off balance sheet that shed light over the detrimental impacts of financial innovation over the economy as a whole. Financial Institutions & Market – Financial Innovation There has been significant debate regarding the validity of financial innovation. It has been suggested that financial innovation plays a vital role in the economic growth and prosperity and that, resultantly, financial system regulators should resist over-regulation that might create hindrances in the way of innovation. As a counter argument, it has been brought to foreground that certain financial innovations have been blamed for creating enormous economic crises in the recent past. As a result of such financial crises, governments all over the globe are taking extraordinary measures in order to avert more of such crises and they are imposing new financial regulations in this regard. The question that would be discussed in the following paper is whether the potential benefits of the financial system innovation should deter regulators from imposing restrictions on the activities of financial institutions. ADVANTAGES OF FINANCIAL INNOVATION Even though financial innovation has been blamed as the main reason behind financial crises, it has also been said that financial innovation is very important for economic growth. The economic crises that have been said to be due to financial innovation are actually due to the improper use of financial innovation. Innovation, if used properly and constructively, can lead towards growth and prosperity in the economy of a country. Following are some of the benefits of financial innovation: Creation of New Securities Financial innovation is the leading reason behind the creation of new securities. Any creation of securities leads towards new capital which is used for economic growth. By creating of new securities, investors invest in the securities and earn returns while the institutions that create such securities invest the capital for the purpose of economic growth (Kimmel, 2010). The resultant growth creates new job opportunities and adds new revenue to the overall economic system of the country. In this way, financial innovation leads towards new investment and financial growth. Creation of New Markets and Institutions Financial innovation is the reason behind the creation of new markets and financial institutions. For example; the concept of ‘Collective Investment Schemes (CIS)’ came to foreground due to financial innovation and this method is being widely used by investors all around the world to create and invest in investment schemes with different investment portfolios (Boot & Thakor, 1997). The investment schemes
Financial Institutions & Market – Financial Innovation [University] [Instructor Name] ABSTRACT Financial innovation has been a topic for debate recently and its pros and cons have been widely discussed. A number of financial experts and economists are of the view that financial innovation should be encouraged as it leads towards new avenues for investment and economic growth, while other experts believe that unmonitored financial innovation is the leading cause behind the financial crises…
Similarities and Differences between Ijarah Contract and Leasing 4. AAOIFI Standards and IFRS Recommended Accounting Treatment of the Ijarah/Leasing Contracts 5. Conclusion 1. Introduction: A sound banking method forms the base for every winning financial system.
The Financial Crisis In 2008, the global market collapsed, The Bush administration figured out that only government intervention could save the companies whose failure could fetch destructive reactions. American Insurance Group (AIG) and Fannie Mae and Freddie Macare are those two giants which suffered from this crisis.
Every country tries to formulate an optimum monetary policy to ensure economic stability and growth of the country’s economy. While doing so, the interest rates are mainly targeted. Good monetary policy helps stabilize the prices and curb unemployment. Monetary policies of a country are different from the fiscal policies in a way that, fiscal policies make use of government expenditures and taxation and not interest rates.
can be supposed to be the attributing factors towards the development of financial innovation. Innovations are mainly done to achieve the basic objectives of financial systems like facilitating the required payment instruments, increased savings, reduction in costs, etc.
Name Institution Course Instructor Date Financial Innovation Abstract Many economists have been skeptic to financial innovation arguing that it has unprecedented effects to the taxpayers. Various economic arguments have proved the need to institute economic policies to guide the financial innovation.
The study highlights the methods of functioning, importance of DFM and its relative importance to the domestic, foreign and institutional investors. The study will focus on the equipments required for trading purposes in Dubai and the rules and regulations required while trading.
Dubai Financial Market (DFM) was founded as a sovereign corporate body, by the Ministry of Economy. It operated like a secondary market that traded securities issued by different public companies, units of diverse investment funds, bonds that were issued by local, and Federal government, and also public institutions.
These days people are entertained by a variety of instruments being offered by various financial institutes to fulfill their needs and requirements. But as we know that to achieve something, one has to sacrifice other; in the same manner, to avail those
In this paper, I will try to explore the different roles of financial institutions to individuals and businesses. After which, I shall highlight the importance of financial tools and methods such as forecasting by taking the hypothetical role of manager of the high school division of Abel Athletics.