THE U.S. financial system has changed greatly in the past twenty years
and will unquestionably continue to evolve in response to challenges and
opportunities. In this paper I survey a number of important innovations
that have occurred in an attempt to understand the forces that led to
change and the consequences the innovations have for the future conduct
of monetary policy. As will be seen, each of the innovations is itself a
response to conditions that existed in money and capital markets on some
date. Indeed, it can be claimed that each innovation was induced by
monetary policy decisions that were taken before that date.
