Financial innovation, in theory, is generally supportive of economic growth and improves the allocation of savings, because it contributes to create deeper and more complete financial markets. Furthermore, under normal circumstances, it increases the efficiency of the transmission mechanism of monetary policy because central banks’ actions can potentially influence a larger number of economic agents.
In general, monetary policy can be more stable and interest rates less volatile because smaller policy rate changes would be needed in order to achieve the desired effect on aggregate demand. 9  Lane and Milesi-Ferretti (2006).