Impact of Financial Derivatives on the Real Economy

Abstract

In this paper we use correlation analysis and Granger causality tests of time series to investigate the impact of financial derivatives on the real economy. We obtained statistically strong and mutually compatible results. Over the period under review have as exchange trade derivatives (1986-2012), as well as OTC derivatives (1998-2012) in principle a negative impact on the real economy. OTC derivatives measured by notional amounts outstanding reduce economic growth and increase unemployment, exchange traded derivatives (amounts outstanding) increase unemployment as well. On the other hand, both groups have a positive impact on reducing inflation. Tests of results confirmed the positive correlation and causality between economic growth and falling unemployment rate, respectively between economic growth and rising inflation. The conclusions are valid for the group of high income countries (according to the methodology of the World Bank), for the period 1986-2012. As compatible, but as well as disputable, is the result according to which the size of the OTC derivatives market in notional (notional amounts outstanding) and market value (gross market values) negatively correlated with each other. This finding will require further research to explain or deny.