What is the impact of financial innovation products on the stability of the global economy
Financial institutions have gone through massive changes through the years due to the rapid global economic growth, globalization and financial liberalization. One of the most prominent of this change has been the substantial rise in profitability through financial innovation products. But the financial crisis of 2008 changed the perception of financial innovation products, derivatives in particular as they have been blamed by different analysts as the prime catalyzing force behind the financial crisis. A high level of financial innovation has been correlated to global growth opportunities and GDP per capita growth in sectors that rely on external financing and innovations. However, it has also been related to higher off beat bank fragility, enormous bank profit volatility and lofty bank losses especially during the 2008 crisis. This essay will examine the impact of financial innovation products on the stability of the global economy.
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