Economics of Money, Banking and Financial Markets, The, Business School Edition (5th Edition) (What's New in Economics)
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Chapter 12, Problem 22Q
To determine

  1. What is financial innovation?
  2. Restriction on credit market
  3. Financial innovations’ impact on the effectiveness of macro-prudential regulations

Concept introduction:

The process of financial innovation impacts the effectiveness of macro prudential regulation as it imposes upon the credit market by taking risks in some events like credit boom. The main factor of financial innovation is credit boom. So, in such a situation macro-prudential regulations are generally not met or met but with discrepancies. Therefore, the effectiveness of macro-prudential regulations is highly abridged.

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