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Financial Innovations and the Welfare of Nations

How Cross-Border Transfers of Financial Innovations Nurture Emerging Capital Markets

  • Laurent L. Jacque
  • Paul M. Vaaler

Table of contents

  1. Front Matter
    Pages i-xii
  2. Financial Innovations and the Dynamics of Emerging Capital Markets

  3. Financial Innovations and Systemic Risk

    1. Front Matter
      Pages 23-23
    2. Peter Christoffersen, Vihang Errunza
      Pages 41-60
    3. Scot A. C. Gould, Stephen A. Naftilan, Sarkis J. Khoury, Danae J. Wright
      Pages 87-106
  4. Financial Innovations and Capital Market Integration

  5. International Securitization Innovations

    1. Front Matter
      Pages 197-197
    2. Tamar Frankel
      Pages 199-221
    3. Paul M. Vaaler
      Pages 223-245
    4. Anne Zissu, Charles Stone
      Pages 267-281
    5. Antoine Hyafil
      Pages 283-297
  6. Financial Derivatives Innovations

    1. Front Matter
      Pages 299-299
    2. Eric Briys, François de Varenne
      Pages 301-314
    3. Michael S. Canter, Joseph B. Cole, Richard L. Sandor
      Pages 315-338
    4. Robert Neal
      Pages 339-355
  7. Back Matter
    Pages 357-367

About this book

Introduction

The central question addressed in Financial Innovations and the Welfare of Nations is how the transfer of financial innovations from developed to developing economies can nurture the dynamics of emerging capital markets. National capital markets can be positioned along a continuum ranging from embryonic to mature and emerged markets according to a decreasing "national cost of capital" criterion. In the introductory chapter Laurent Jacque argues that newly emerging countries are handicapped by a high cost of capital due to "incomplete" and inefficient financial markets. As capital markets graduate to higher level of "emergedness", their national firms avail themselves of a lower cost of capital that makes them more competitive in the global economy and spurs economic growth. Skillful transfer of financial innovations to emerging markets often encourages the deregulation of the country's financial services sector. This results into new conduits for a more efficient capital allocation process such as commercial paper, securitized consumer finance and other disintermediated modes of financing which out-compete traditional financial intermediaries (mostly commercial banks), reduce households' cost of living and conjointly fuel the dynamics of emerging markets. Our response to the central question of how the transfer of financial innovations can enhance the Wealth of Nations is to show that it reduces the cost of capital while not unduly increasing systemic risk. Part I examines the relationship between financial innovations and systemic risk of the international financial system.

Keywords

Banking Capital Markets Credit Derivatives Derivatives Equity Market Finance Financial Market Investment Investments

Editors and affiliations

  • Laurent L. Jacque
    • 1
    • 2
  • Paul M. Vaaler
    • 1
  1. 1.Fletcher School of Law and DiplomacyTufts UniversityUSA
  2. 2.HEC School of ManagementFrance

Bibliographic information