Insurance Market Development and Macroeconomic Interactions in Twenty-Six Countries

Rudra P. Pradhan, Mak B. Arvin, John H. Hall and Neville R. Norman
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Rudra P. Pradhan, Mak B. Arvin, John H. Hall and Neville R. Norman: Indian Institute of Technology, Trent University, University of Pretoria, and University of Melbourne
Authors registered in the RePEc Author Service: Mak Arvin

Journal of Economic Development, 2017, vol. 42, issue 4, 23-57

Abstract: This paper examines the cointegrating and causal relationships between insurance market development (IMD) and economic growth based on panel-data estimation techniques. It also investigates the dynamic interrelationships amongst a number of important macroeconomic variables on IMD-growth nexus. The sample consists of 26 countries observed over the period 1980-2013. We use six different indicators of IMD, covered under both insurance density and insurance penetration, to validate the robustness of our results. Our findings affirm a long-run equilibrium relationship between insurance market development, economic growth, and six other macroeconomic variables selected, namely broad money supply (relative to national income), real interest rates, inflation rates, urban population growth, youth dependency ratios, and government consumption expenditure (relative to national income). We use a panel vector auto-regression model to examine the nature of Granger causality among the variables. Most significantly, we find that IMD and some macroeconomic variables Granger-cause economic growth in the long run, irrespective of which measure of IMD we use.

Keywords: Insurance Market Development; Economic Growth; Panel Data (search for similar items in EconPapers)
JEL-codes: L96 O32 O33 O43 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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