Schumpeterian innovations, financial innovations and instability: An institutional perspective

Faruk Ülgen

Cuadernos de Economía - Spanish Journal of Economics and Finance, 2015, vol. 38, issue 106, 46-53

Abstract: This paper seeks to assess the nature of financial innovations as regards the economic stability throughout an institutional framework within the Schumpeterian tradition. While in the Schumpeterian evolutionary process entrepreneurial innovations are assumed to lead the entire economy towards economic development, financial innovations do not obviously generate the same positive outcome for economic evolution. To point to the ambiguous nature of financial innovations the paper suggests a monetary interpretation of Schumpeterian capitalist dynamics and sheds light on the role of the institutional environment to ensure viable economic development. It then argues that in highly liberalized environment, unconstrained financial dynamics may lead to system-wide crises and make public regulatory schemes necessary for the sake of systemic stability.

Keywords: Financial; innovations.; Financial; instability.; Monetary; economy.; Regulation.; Schumpeterian; innovations. (search for similar items in EconPapers)
JEL-codes: B25 G01 O16 (search for similar items in EconPapers)
Date: 2015
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Working Paper: Schumpeterian innovations, financial innovations and instability: an institutional perspective (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:cud:journl:v:38:y:2015:i:106:p:46-53

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