Financial innovation can lead to both benefits and risks from "summary" of The Economics of Money, Banking and Financial Markets, eBook, Global Edition by Frederic S. Mishkin
Financial innovation plays a crucial role in the evolution of financial markets, bringing about both advantages and drawbacks. On the one hand, it can lead to benefits such as increased efficiency, reduced costs, and improved access to financial services. For example, the development of new financial products and services can cater to the diverse needs of consumers and businesses, fostering economic growth and prosperity. Additionally, innovations in technology have revolutionized the way financial transactions are conducted, making it easier and quicker for individuals to manage their finances. However, with these benefits also come risks that need to be carefully managed. Financial innovation can lead to the creation of complex products that may be difficult to understand and evaluate, increasing the likelihood of market disruptions and financial instability. For instance, the pr...
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