The Global Crisis and Financial Innovation

Abstract

The nature and future of financial innovation in the context of the current global economic crisis are the main 
topics of this article. My main argument is that criticism of financial innovation should be handled carefully, 
even if it has recently lost popularity since some of its products participated in the credit bubble that caused the 
crisis. Innovation has long existed, and it has generally had a favorable impact on welfare and finance. 
Innovation may continue to benefit our society as long as prudential regulation is strengthened to deter excessive 
risk-taking in the future.