We leverage a 'catch-all' measure of financial innovation-research and development spending in the financial sector-to assess the net relationship between financial innovation and economic growth and evaluate the influence of macroprudential policy on this relationship. Using a panel of 23 countries over the period of 1996-2014, our results demonstrate a net-positive relationship between financial innovation and gross capital formation. We find no evidence of a net-negative impact of financial innovation on economic growth, challenging the popular and political stigma surrounding financial innovation. We also find little robust evidence of macroprudential policy influencing the relationship between financial innovation and economic growth. Our results support a functional approach to the regulation of financial innovation, which improves the intermediation process, leading to increased capital formation. Highlights:  Financial-sector spending on research and development is used as a proxy for aggregate financial innovation.  Financial innovation is positively related to economic growth through gross capital formation, but demonstrates no significant link with per capita GDP growth or new firm density.  Macroprudential policy does not influence financial innovation's impact on capital formation, and its effect on financial innovation's relationship with other growth measures is specification dependent.