Derivative Markets and Economic Growth: A South African Perspective

Matthew Stevens and Cobus Vermeulen
Additional contact information
Matthew Stevens: Department of Economics, University of South Africa (Unisa), Pretoria 0003, South Africa

Economies, 2024, vol. 12, issue 11, 1-21

Abstract: It is well established that financial development and innovation promote economic growth through improving the allocation of capital, enhancing risk management, contributing to price discovery, and increasing market efficiencies. While a vast empirical literature is devoted to the nexus between financial development and economic growth, however, substantially less research has been done on the relationship between derivatives and growth, especially in the emerging-market context. Derivatives can be viewed as a specific category of financial innovation, which may advance economic growth through its specialised functions of risk management and price discovery. This paper contributes to bridging this gap in the literature by exploring the impact of exchange-traded futures derivatives on South African economic growth, output, and economic growth volatility. It employs ARDL bounds tests, Granger causality tests and GARCH volatility modeling to analyse the effects of exchange-traded futures derivatives on various measures of South African economic activity. The main result is that exchange-traded futures derivatives contribute positively to South African economic growth and economic activity. This may suggest that opportunities might exist in other emerging economies, with financial structures comparable to that of South Africa, to encourage the development of organised and well-regulated derivatives markets to unlock economic growth in these economies.

Keywords: derivatives; futures; financial development; economic growth; ARDL bounds test; Granger causality; GARCH (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-7099/12/11/312/pdf (application/pdf)
https://www.mdpi.com/2227-7099/12/11/312/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jecomi:v:12:y:2024:i:11:p:312-:d:1522838

Access Statistics for this article

Economies is currently edited by Ms. Hongyan Zhang

More articles in Economies from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().