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An evolutionary game theory model for the inter-relationships between financial regulation and financial innovation

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  • An, Hui
  • Yang, Ruibo
  • Ma, Xuejiao
  • Zhang, Siqi
  • Islam, Sardar M.N.

Abstract

Financial regulation and financial innovation tend to show a dynamic game process of ‘regulation-innovation-re-regulation-re-innovation’. This paper constructs an evolutionary game model to simulate the above phenomena for analyzing the stable equilibrium strategies between financial institutions and regulation institutions. Previous studies mainly stay in a theoretical perspective; instead, this study uses the financial and macroeconomic data of the U.S. during 1947–2007 to numerically demonstrate the dynamic evolution paths of financial regulation and financial innovation. This study finds that the financial regulation and financial innovation of the U.S. presents a dynamic adjustment process by promoting the development of each other. Both regulatory and innovative strategies should be coordinated in the evolutionary progress in a timely and coordinated reason. This study has great referential value for policy makers to balance regulation and innovation in the financial industry and for avoiding financial crises.

Suggested Citation

  • An, Hui & Yang, Ruibo & Ma, Xuejiao & Zhang, Siqi & Islam, Sardar M.N., 2021. "An evolutionary game theory model for the inter-relationships between financial regulation and financial innovation," The North American Journal of Economics and Finance, Elsevier, vol. 55(C).
    • Handle: RePEc:eee:ecofin:v:55:y:2021:i:c:s1062940820302266
    DOI: 10.1016/j.najef.2020.101341
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    2. Wang, Yifei & Meng, Xinzhu & Alzahrani, Abdullah Khames, 2024. "Stability, period and chaos of the evolutionary game strategy induced by time-delay and mutation feedback," Chaos, Solitons & Fractals, Elsevier, vol. 181(C).
    3. Li, Guoxiang & Wu, Haoyue & Jiang, Jieshu & Zong, Qingqing, 2023. "Digital finance and the low-carbon energy transition (LCET) from the perspective of capital-biased technical progress," Energy Economics, Elsevier, vol. 120(C).
    4. Olha Popelo & Maksym Dubyna & Nataliia Kholiavko, 2021. "World Experience In The Introduction Of Modern Innovation And Information Technologies In The Functioning Of Financial Institutions," Baltic Journal of Economic Studies, Publishing house "Baltija Publishing", vol. 7(2).

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