Knowledge, Technology Adoption and Financial Innovation

Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft

Abstract: 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

Keywords: Technology adoption; financial innovation; learning (search for similar items in EconPapers)
JEL-codes: G20 N20 O30 (search for similar items in EconPapers)
Date: 2005-06
New Economics Papers: this item is included in nep-cfn, nep-dev, nep-fin, nep-fmk, nep-ict and nep-ino
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Working Paper: Knowledge, Technology Adoption and Financial Innovation (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:ube:dpvwib:dp0513

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