Abstract
BackgroundThis study examines the relationship between insurance market density (IMD) and economic growth.MethodsWe employed Granger causality technique in 19 Eurozone countries for the period 1980-2014. We use three different indicators of IMD, namely life insurance density, non-life insurance density, and total insurance density. We particularly emphasize on whether Granger causality runs between IMD and economic growth both ways, one way, or not at all.ResultsOur empirical result recognizes the presence of both unidirectional and bidirectional causality between insurance market density and economic growth. However, these results are mostly non-uniform across Eurozone countries.ConclusionsThis study holds important policy implications- economic policies should recognize the differences in the insurance market density and economic growth in order to maintain sustainable economic growth in the Eurozone.
Highlights
This study examines the causality between insurance market density (IMD) and economic growth
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 (DFH2) of insurance market-growth nexus
Germany, Greece, Malta, and Spain, we find the presence of unidirectional causality from economic growth to total life insurance density [GDP = > TID], supporting the demand-following hypothesis (DFH3) of insurance marketgrowth nexus
Summary
We employed Granger causality technique in 19 Eurozone countries for the period 1980-2014. We use three different indicators of IMD, namely life insurance density, non-life insurance density, and total insurance density. We emphasize on whether Granger causality runs between IMD and economic growth both ways, one way, or not at all
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