It is no surprise that we are having this discussion of inclusiveness and innovation at this year’s conference. According to the Financial Stability Board, crowd funding, peer-to-peer lending, and other innovative products will certainly affect financial services provision such as bank lending services, investment management and advisory functions.
Initially the difference between actual output and potential output, the output gap, is likely to be positive, generating inflationary pressures. However, once the demand effects begin to bite, the output gap will narrow and inflationary pressures subside. At this point, it is perhaps worth noting that the impact on prices or inflation may differ depending on the source of the negative supply shock.