Growth through Risk Management

Role of Derivatives in Global Economy

Recently, CME Group partnered with the Milken Institute to complete a study about the important role derivatives products play in global commerce. The paper includes case studies of the airline, energy and food-processing industries to provide detail and context for the macroeconomic analysis around futures markets.

So what did they find? Milken states that derivatives have, in fact, had positive economic impacts and have contributed to U.S. economic growth.

The study's key findings include:

  • Banks' use of derivatives, by permitting greater extension of credit to the private sector, increased U.S. quarterly real GDP by about $2.7 billion each quarter from Q1 2003 to Q3 2012.
  • Derivatives use by non-financial firms increased U.S. quarterly real GDP by about $1 billion during the same period by improving their ability to undertake capital investments.
  • Combined, derivatives expanded U.S. real GDP by about $3.7 billion each quarter. The total increase in economic activity was 1.1 percent ($149.5 billion) between 2003 and 2012.
  • By the end of 2012, employment had been boosted by 530,400 (0.6 percent) and industrial production 2.1 percent.

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