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The Synergistic Effect of Insurance and Banking Sector Activities on Economic Growth in Africa

Mehmet Balcilar (), Rangan Gupta (), Chien-Chiang Lee () and Godwin Olasehinde-Williams ()

No 201818, Working Papers from University of Pretoria, Department of Economics

Abstract: It is widely understood that the insurance and banking sectors of every economy perform some functions in driving economic growth. What is not yet well documented is whether their roles are complimentary or substitutive. With the aid of the dynamic panel-GMM estimation technique, this paper evaluates the synergistic effect of both sectors on economic growth in a panel of 11 African countries that are responsible for most of the activities in the continent’s financial sector. The insurance-banking-growth nexus was also examined through panel causality tests. The results show that life insurance market and the banking sector are complimentary and that the non-life insurance market and the banking sector are also complimentary. We find that overall, the relationship between the insurance and banking sectors in Africa is a complimentary one and that their synergistic impact on economic growth is positive. The feedback hypothesis was also confirmed in the relationship between the insurance sector and economic growth and between the banking sector and economic growth.

Keywords: Synergistic effect; Insurance market; Banking sector; Africa; Dynamic GMM; Panel Granger causality (search for similar items in EconPapers)
JEL-codes: C33 G21 G22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr, nep-fdg and nep-ias
Date: 2018-03
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