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Study on Self-organization Evolution of Financial Innovation System

Author: PengHuiJuan
Tutor: ZhuShuZhen
School: Donghua University
Course: World economy
Keywords: financial innovation system self-organization evolution Sub prime crisis compassion between US and Canada
CLC: F830
Type: Master's thesis
Year: 2011
Downloads: 122
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Abstract

The analysis of financial innovation in The transitional new classical economic is usually under the framework of Static equilibrium and focus on the motivation and effect of the innovation.But, the traditional method can’t give a reasonable elaboration on the question about the self-adaptive feature and relationship with environment. Also,it can’t help with the effective explanation on the internal mechanism of financial innovation and the interaction between the behavioral agent and environments the traditional analysis cannot guide the practice of financial innovation. Therefore, we must take it as a complex large system from the perspective of systematic and evolutionary. Based on these, this paper use the theory of self-organization which is considered as a useful tool in the study on the evolution and try to find the underlying principle in the evolutionary process of financial system. In this paper, the author study on the premise, power, and route of the financial innovation process, introduce the concept of entropy into the research, illustrate the entropy exchange in the evolutionary process and consider all these factors into the modeling of the dynamic evolution. This paper tests and verify the conclusions of theoretical analysis by a case study which is the comparison between US and Canada in the sub prime crisis.Firstly, this paper defines the financial innovation system and the related concept. such as the elements, structure, environment, propose the concept the financial innovation system evolution. divide the process into four periods embryonic, growth, mature, recession. and describe the features of different stage in the evolution. such as uncertainty, dynamic and self-organized.Secondly, after the basic analysis of the general evolution,this paper begins to use the self-organization theory to deeply research on the underlying principle. Study finds that the financial innovation system evolution is essentially a self-organization process that it satisfy the premise of non-equilibrium and opening, exist nonlinear relationship and stochastic force. According to analysis of entropy exchange, this paper illustrates the importance of environment to maintain the stable of the system. and get the conclusion that the competition and synergy is the power of the evolution, the bifurcation and choice is the route of evolution. finally, the paper develops a macro level evolutionary model considering the nonlinear relationship, stochastic force,positive and negative feedback. the result point that the financial innovation is a self-organization process in nature., the system and the environment is interactive during the process.The case study on the sub prime crisis support the result above, especially by the comparison between the US and Canada. The paper stress that the importance of good environment and the internal risk control from the perspective of entropy.Lastly, as to the problem of our domestic financial innovation,the paper gives the related proposals.

Study on Self-organization Evolution of Financial Innovation System

Abstract

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