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The dynamic linkage between insurance and banking activities: An analysis on insurance sector assets

Chi-Hung Chang

Journal of Multinational Financial Management, 2018, vol. 46, issue C, 36-50

Abstract: This article investigates the dynamic linkage between insurance and banking activities from the asset size of the insurance sector in the context of a panel vector autoregression (VAR) framework using data for 73 countries from 1980 to 2014. Panel Granger-causality tests show that a Granger causal relation generally runs from banking activities to insurance sector assets. Impulse response analyses for the whole sample demonstrate that the size of insurance assets responds positively to a shock to liquid liabilities and deposits of the financial system, but negatively to a shock to deposit money bank assets as well as private credit issued by commercial banks, other financial institutions, and deposit banks. The observations are qualitatively identical for high-income countries, while the results are largely different for middle- and low-income countries. Moreover, we observe a significant interaction between insurance and banking activities in civil law countries rather than in common law ones.

Keywords: Insurance activities; Banking activities; Panel Granger causality test; Panel VAR approach (search for similar items in EconPapers)
JEL-codes: C23 G21 G22 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:mulfin:v:46:y:2018:i:c:p:36-50