Financial Innovation

Early to 1960s,MacKinnon and some other economists have revealed the hindrance function of financial curb and given suggestion of encouraging economic growth by financial deepening. Influenced by this theory,many countries adopted free finance policy in 1970s. As a result,international finance made rapid progress and price fluctuation of global wide financial market was enhanced. In chapter two,I will discuss the process of financial innovation in USA. One of the theories concluded from financial innovation is that,by strengthening policy measures to influence currency flow speed and thus influence nominal GNP,financial innovation can weaken the function of GNP and Ml as intermediate policy. To confine nominal GNP growth ratio changes to a certain range,national currency bureau must have a correct prediction of the initial currency flow speed decline. In Chapter 3,I will discuss the impact of financial creation on finance as a whole. Financial innovation also boost the fast growth of financial production,lead to rapid rise of third industry production hi GDP (or GNP),thus contribute to the growth of third industry and GDP (or GNP) as a whole. Take example of float interest security or float interest bond,those are new financial tools of innovation based on traditional financial tools. They can help financial agencies to reduce interest risk in capital collection. Under the propel of free finance wave,many developed countries take actions to release limitation on international capital flowing in home market and on foreign capital issuer collecting capital by issuing stocks in home financial market. Those financial agencies can continually provide all kinds of trade information to their customers all over the world by computer and Internet for their choice and reference. The form and development of new financial tools,which involves in many markets,contribute to the integration of financial market. Financial innovation the stability of financial system and reduce the function of financial management. To show its good financial situation,a financial agency can improve its income flow by selling financial future security and delay the potential loss to future. So financial innovation can create possibilities of new financial crisis. Without financial innovation,financial systemwould not have such deep changes and revolution. Without financial innovation,our economy and finance might still linger in a low level. Without financial innovation,human may still stay hi the " era of uncivilized finance". In chapter 4,1 will analyze condition of developing financial derivation market in our country and its strategies. I will emphasis on grasping opportunities to issue financial futures market,and discuss the meaning and methods of futures market for our financial market. In the last,thechapter 5,1 will give out the key point of my paper-The securitisation of the assetsof bank.