ECON 319 Lecture Notes - Lecture 13: Financial Innovation, Capital Flight, Capital Market
9 Feb 2017
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Document Summary
Addresses four major issues: what it means to have an efficient financial system. Accident prevention is only one aspect: alternate sources of financial crises in general and roots of recent crises, best ways to design a system. National and international level: question of effective crisis response. Financial systems need to bring wants and opportunities together: economy grows due to higher earning investments, scarce capital put to good use, consumers benefit from more future consumption, risks are shared. Less volatility faced by individuals in the amounts they are able to consume. So international financial integration represents an improvement in financial intermediation. Increase in economic efficiency with benefits for consumers and investors around the world. Financial innovation analogy: jet airplane: made air travel more comfortable, efficient, and safe, but accidents were bigger and more numerous, so, in the modern global financial market - There"s enormous potential for benefit but also accidents that are much more spectacular.
