How does equity derivative market affect economic growth? Evidence from the Asia-Pacific region

Abstract

This research scans the association between economic growth and derivatives markets in the Asia-Pacific region between 2001 and 2022. Using the autoregressive distributed lag model, we reveal a bidirectional linkage between derivative markets and economic growth. We further demonstrate that both derivatives and stock markets have a strong positive association with economic growth, underscoring the significance of financial markets in driving economic advancement. We suggest policies prioritizing sustainable economic development and regulation of financial markets, particularly derivatives and stock markets, to increase market transparency, reduce information asymmetry, and foster economic growth.