Financialization and Real GDP
First, we have analysed whether the financialization process has had any impact on the economic activity of the Eurozone countries before and during the Great Recession. Specifically, we have tested whether the change (measured as a percentage of real GDP) of net financial assets, financial assets, or financial liabilities recorded for each period in the euro countries has had a significant effect on the evolution of the real GDP
In this sense, the dependent variable represents the percentage change of the real GDP, measured according to the following formula: GDP;- GDP;-n/ GDPt-n*100. Data about real GDP come from the AMECO database. Regarding the independent variables, these are related to the changes in the main components of the financial balance sheet of Total Economy. We have run three regressions, one for each of the possible explanatory variables: the change in the size of net financial assets; the change of the size of financial assets; and the change in the size of financial liabilities.
All the regressions offer similar results. We have not found any significant relationship between the variation in the GDP and the change recorded in the net financial assets, in the financial assets or in the financial liabilities, neither in the period 1999-2008 nor in the years 2008 to 2014. This result takes place when we test the existence of a linear or a quadratic relationship between the dependent and the explanatory variable.
Therefore, the financialization process would have not been a determinant of the increase of the GDP before the crisis (between 1999 and 2008, the mean GDP increase in the Eurozone amounted to 33.2 percent, in parallel to an average increase of financial assets and liabilities of 383 and 386 percent of GDP, respectively, and a decline in the average size of net financial assets amounting to -2.8 percent of GDP) or the decline in the GDP that has taken place during the Great Recession (between 2008 and 2014, the average GDP decline in the Eurozone amounted to -1.2 percent, in parallel with an average increase of financial assets and liabilities of 401 and 402 percent of GDP, respectively, and a decline in the average size of net financial assets amounting to -0.5 percent of GDP).