Insurance–growth nexus and macroeconomic determinants: evidence from middle-income countries

Insurance market density and economic growth in Eurozone countries: the granger causality approach

“….98**/ -3.76** −10.10**/ -3.49** −10.9**/ -4.27** Note 1: GDP is per capita economic growth; LID is life insurance density; NID is non-life insurance density; TID is total insurance density; and EZP is Eurozone panel Note 2: The figures are the t-coefficients of lagged error correction term Note 3: ** is statistical significance at 5% level findings of earlier studies by Alhassan and Biekpe (2016), Pradhan et al (2017), Alhassan and Fiador (2014), Chang et al (2014), Guochen and Wei (2012), Lee (2011), Arena (2008, Kugler and Ofoghi (2005), Webb et al (2005a), andCatalan et al (2000). For, Austria, Germany, Greece, Ireland, Italy, Malta, Portugal, and Slovakia, we find the presence of unidirectional causality from economic growth to non-life insurance density [GDP = > NID], lending support the demand-following hypothesis (DFH 2 ) of insurance market-growth nexus.…”

“…Here, the Granger causality runs from insurance market activities to economic growth. The studies supporting SLH are Alhassan and Biekpe (2016), Pradhan et al (2017Pradhan et al ( , 2015, Alhassan and Fiador (2014), Chang et al (2014), Lee et al (2013aLee et al ( , 2013b, Guochen and Wei (2012), Lee (2011), Adams et al (2009), Kugler and Ofoghi (2005), and Boon (2005).…”

“…First, the affordability 5 of insurance; second, the amount of regulation imposed on the insurance industry by the host government; third, the amount of risk and uncertainty that the people in the society perceive in their lives; and fourth, the degree to which these individuals want to minimize these perceived risks by purchasing insurance rather than relying on the other mechanisms to hedge risks (see, inter alia, Pradhan et al 2017;Lee et al 2013aLee et al , 2013bPark et al 2002;Soo 1996). At the empirical level, a large section of finance-growth work assesses the impact of the banking sector on economic growth.…”

“…This means, in practice, insurance market activities and economic growth can Granger cause each other, and hence, there is a prospect of feedback relationship between the two. Overall, there are four possible hypotheses to signify the Granger causal relationship between insurance market activities and economic growth (Pradhan et al 2017;Alhassan and Fiador 2014;Ward and Zurbruegg 2000).…”

“…However, in extant literature, the link between insurance market activities and economic growth has not been fully recognized, and most empirical results vary according to data and econometric tools (see, inter alia, Lee et al 2013aLee et al , 2013bOutreville 2013). There is no universally held view of the nature of causality between insurance market activities and economic growth (see, inter alia, Pradhan et al 2017;Alhassan and Fiador 2014;Chang et al 2014;Kugler and Ofoghi 2005;Ward and Zurbruegg 2000). Therefore, we investigate the causal nexus between the two in order to ascertain the actual fact; that is, "How do insurance market activities cause economic growth?"…”