Derivatives can be good for growth, new Institute study says

Forward  |  View web version » Upcoming Events Global Conference 2014 April 27-30 Los Angeles Registration is now open Buzzworthy Videos A Conversation with Lewis Ranieri, Richard Sandor and Myron Scholes. Moderated by Michael Milken How Derivatives Boost the Economy: Ross DeVol on CNBC Chart of the Matter Airlines use derivatives to hedge against adverse price shifts, allowing them to prevent out-of-control costs from affecting consumers. Quick Links Milken Institute Research Events Blog MI Review Derivatives can be good for growth, says new Milken Institute study "Deriving the Economic Impact of Derivatives" is the first-of-its-kind quantitative examination of financial derivatives' role in the U.S. economy. Focusing on credit extension and firm value, the study charts the net positive effects from their use in both the financial and non-financial sectors. For banks, our research shows, the use of derivatives allows for a larger volume of commercial and industrial loans, increasing business investment. The data also demonstrate that non-financial firms that hedge with derivatives are valued higher than firms that do not. Highlights of the study's findings: Derivatives' use by financial and non-financial firms expanded quarterly real GDP by about $3.7 billion each quarter from 2003 to 2012. The total increase in economic activity was 1.1 percent, or $149.5 billion, during that time. By the end of 2012, employment had expanded by 530,400, or 0.6 percent, and industrial production 2.1 percent, due to the use of these instruments. Other Recent Publications Investing in California: Recommendations from the Summit (Re)inventing Israel's Capital Markets Emerging Markets: Temporary Turbulence, Long-Term Resilience Insights from Institute Experts Propping up a 'House of Cards' There are key lessons that can help policymakers in Maryland and other states seeking to build a healthy filmed entertainment sector. More... $700 trillion in global OTC derivatives? Behind the number There are at least three reasons we should not use this figure to assess its place in finance and potential dangers lurking. More... Centering the diagnosis around the patient Diagnostics have become both the gatekeeper and referee for effective therapies, with annual projected growth between 12 to 15 percent. More... A potential silver lining in Ukraine Despite all its difficulties — highlighted in a recent blog — Ukraine is not facing insolvency. More... JOBS Act: Comments to the SEC on Proposed Rule Amendments to Regulation A The proposal seeks to create two tiers of Reg A offerings. More... Testimony of Chris Brummer before the European Parliament Committee on Economic and Monetary Affairs Our Senior Fellow made three suggestions as to what the European Union should not do in its negotiations with the United States. More... A nonprofit, nonpartisan economic think tank, the Milken Institute believes in the power of finance to shape the future. The Milken Institute produces rigorous, independent economic research-and maximizes its impact by convening global leaders from the worlds of business, finance, policy, academia, and philanthropy. By fostering collaboration between the public and private sectors, we transform great ideas into action. MILKEN INSTITUTE Changing the world in innovative ways Santa Monica | Washington | Singapore Privacy Policy  |  Manage Subscriptions  |  Opt-Out of all emails © 2014 Milken Institute | 1250 Fourth Street | Santa Monica, CA 90401