A Comprehensive Review of Financial Frictions: Causes, Consequences, and Policy Implications

Authors

  • Mohammed Faez Hasan Associated Prof. of Finance, Financial and Banking Sciences Dept., University of Kerbala, Iraq.
  • Maitham Rabea Hadi Financial and Banking Sciences Dept., University of Kerbala, Iraq.
  • Hakeem Hammood Flayyih Institut Supérieur de Gestion, University of Tunis, Tunis
  • Waleed Katee Omran Al-Obaidi Institute of Higher Commercial Studies of Sousse, University of Sousse, Tunisia.

DOI:

https://doi.org/10.55270/ijebs.v4i2.32

Keywords:

Financial Frictions, Financial markets, financial crisis, Information Asymmetries.

Abstract

This study presents an extensive evaluation of the existing literature on financial frictions, delving into their fundamental causes, the subsequent consequences on economic systems, and the policy implications aimed at mitigating their adverse impacts. Our objective is to provide a profound understanding of the factors that contribute to the persistence of financial frictions in financial markets, and emphasize the importance of policy interventions in rectifying these market imperfections. To accomplish this, we explore the diverse origins of financial frictions, shedding light on the intricate interactions between market participants, information asymmetry, credit rationing, and regulatory constraints. Furthermore, we analyze the repercussions of these frictions on macroeconomic stability, financial market efficiency, and income distribution. Finally, we discuss the role of policymakers in addressing financial frictions, with a focus on designing effective regulatory frameworks and fostering financial innovation to create a more resilient and inclusive financial system. This comprehensive review intends to serve as a valuable resource for researchers, policymakers, and practitioners seeking to better comprehend the complexities surrounding financial frictions and their far-reaching implications.

 

Author Biographies

Maitham Rabea Hadi, Financial and Banking Sciences Dept., University of Kerbala, Iraq.

 

 

Hakeem Hammood Flayyih, Institut Supérieur de Gestion, University of Tunis, Tunis

 

 

Published

2023-04-04

How to Cite

Hasan, M. F., Hadi, M. R., Flayyih, H. H., & Al-Obaidi, W. K. O. (2023). A Comprehensive Review of Financial Frictions: Causes, Consequences, and Policy Implications. Ishtar Journal of Economics and Business Studies, 4(2), 1–13. https://doi.org/10.55270/ijebs.v4i2.32

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