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The link between life insurance activities and economic growth: Some new evidence

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  • Lee, Chien-Chiang
  • Lee, Chi-Chuan
  • Chiu, Yi-Bin

Abstract

This paper applies the panel seemingly unrelated regressions augmented Dickey-Fuller (SURADF) test to re-investigate the stationarity properties of real life insurance premiums per capita and real gross domestic product (GDP) per capita for 41 countries within three levels of income covering 1979–2007. Our empirical results first reveal that the variables in these countries are a mixture of I(0) and I(1) processes, and that the traditional panel unit-root tests could lead to misleading inferences. Second, for the estimated half-lives, the degrees of mean reversion are greater in high-income countries. Third, there is concrete evidence favoring the hypothesis of a long-run equilibrium relationship between real GDP and real life insurance premiums after allowing for the heterogeneous country effect. The long-run estimated panel parameter results indicate that a 1% increase in the real life premium raises real GDP by 0.06%. Finally, we determine that the development of life insurance markets and economic growth exhibit long-run and short-run bidirectional causalities. These findings offer several useful insights for policy-makers and researchers.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 32 (2013)
Issue (Month): C ()
Pages: 405-427

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Handle: RePEc:eee:jimfin:v:32:y:2013:i:c:p:405-427

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Web page: http://www.elsevier.com/locate/inca/30443

Related research

Keywords: Life insurance premium; Real GDP; Panel SURADF test; Half-life; Panel cointegration;

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Cited by:
  1. Lee, Chien-Chiang & Chiu, Yi-Bin & Chang, Chi-Hung, 2013. "Insurance demand and country risks: A nonlinear panel data analysis," Journal of International Money and Finance, Elsevier, vol. 36(C), pages 68-85.
  2. Lee, Chien-Chiang & Huang, Wei-Ling & Yin, Chun-Hao, 2013. "The dynamic interactions among the stock, bond and insurance markets," The North American Journal of Economics and Finance, Elsevier, vol. 26(C), pages 28-52.

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