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The linkage between insurance activity and banking credit: Some evidence from dynamic analysis

Guanchun Liu (), Lei He, Yiding Yue and Jiying Wang

The North American Journal of Economics and Finance, 2014, vol. 29, issue C, 239-265

Abstract: This paper investigates the long-run and short-run linkages between insurance activity and banking credit for G-7 countries. To minimize the pretest bias and overcome the structural changes, we adopt the bootstrap Granger causality test applied to full sample and subsamples with a fixed window size. The Johansen cointegration test with GMM-IV estimator finds a long-run positive relation between the series. The full sample results of bootstrap Granger causality test show that there is predictive power from life insurance activity to banking credit only for France and Japan, while the short-run causal relationships between nonlife insurance activity and banking credit are country-specific. However, parameter stability test results suggest that the short-run results in full sample are unreliable. The results of rolling VAR models report that the causal linkages between them are time-varying across various subsamples. These findings offer some useful insights for achieving the co-evolution between insurance and banking credit markets.

Keywords: Insurance activity; Banking credit; Bootstrap Granger causality test; Rolling VAR approach; Time-varying causality (search for similar items in EconPapers)
JEL-codes: E51 G21 G22 G28 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:29:y:2014:i:c:p:239-265

DOI: 10.1016/j.najef.2014.06.014

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