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Are Derivatives Implicated in the Recent Financial Crisis? Evidence from Banks in Emerging Countries

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  • Mohamed Rochdi Keffala

    (University of Kairouan, Tunisia2Laboratory of Risk-Management and Research in Accounting and Finance (RIM-RAF), Tunisia)

Abstract

This work aims to inspect the common debate about the implication of derivative instruments in amplifying the last financial crisis. To reach this goal, the study chooses a sample of banks entirely from emerging countries — over the whole period 2003–2011 — in which we examine the impact of derivatives simultaneously on performance, risk and stability during the ordinary period “the pre-crisis period”, 2003–2006, and the unstable period “the crisis and post crisis period”, 2007–2011. The regressions are estimated by generalized methods of moments (GMM) as developed by Blundell and Bond (1998). The major conclusion reveals that only swaps can be considered as implicated in the intensification of the last financial crisis. Therefore, the rest of derivatives instruments cannot be responsible in the amplification of the recent financial crisis. Indeed, the widespread idea accusing all derivatives to be in part responsible of the intensification of the last financial crisis should be revised.

Suggested Citation

  • Mohamed Rochdi Keffala, 2017. "Are Derivatives Implicated in the Recent Financial Crisis? Evidence from Banks in Emerging Countries," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 20(01), pages 1-41, March.
  • Handle: RePEc:wsi:rpbfmp:v:20:y:2017:i:01:n:s0219091517500047
    DOI: 10.1142/S0219091517500047
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    References listed on IDEAS

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