Social–financial approach for analyzing financial transitions

Abstract

This study proposes a social-financial approach (SFA) to fill the methodological research gap in strategic policy design for managing financial transitions during social changes. The SFA seeks to characterize inclusive transitions in response to innovation and analyze financial management in social changes. Using a multilevel perspective, we combine evolutionary finance and inclusive growth analytics into this framework. We contend that the interaction between the different levels can be summarized as spontaneous adjustments and the alignment of financial elements with the indicators. Actors who attempt to achieve their goals based on past performance evaluations and other forms of bounded rationality strive to cope with adjustments and further trigger a reorientation of the existing regime. We also developed a new configuration tool called the three-axis description to describe the evolution of financial transitions at different stages. These methods allow us to analyze the evolution of financial transition and efficiency, and we argue that market efficiency evolves in stages with the financial transition. Finally, to demonstrate the capability of SFA to identify diverse financial transition pathways, we examined an example case: the establishment of the Bretton Woods System.