The relationship between financial derivatives and economic growth: a study on Asian countries / Samhah Shakirah Shamsul Bahrain

There is immense and sturdy evidence that financial sector development affects economic growth for various samples across countries or regions. However, most of the studies researched the impact of the banking and stock market financing on economic growth. Less attention has been paid to links between financial derivatives and economic growth. Thus, this paper aims to explores the relationship between the financial derivatives and the economic growth of Asian countries. This study relies on the relationship between the independent variable, namely commodity futures, stock index futures, domestic credit to private sector, inflation (consumer price index), real interest rate, and trade openness, and the dependent variable of economic growth, proxy by GDP per capita growth, in four Asian countries for the period of 2011 until 2020. The relationship between each independent variable on the dependent variables, has been tested using a multiple regression model. The result of this study shows that in the selected four Asian countries, the stock index futures, inflation (consumer price index), and trade openness have a significant relationship with the economic growth. This result is in line with a study done by Sendeniz-Yuncu et al. (2007) and Vo et al. (2019), as both studies found out that these three variables have a significant relationship with GDP. In addition, this paper concludes with several recommendations for policy- and decision-makers that may help promote the use of derivatives markets to boost economic growth together with some recommendations for future studies.