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Examining comovement and causality between producer price index for P&C insurance premium and uncertainty indices: Wavelet and non-parametric quantile causality approach

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  • Aggarwal, Divya
  • Kalia, Deepali

Abstract

This study examines the impact of the news-based climate policy uncertainty index (CPU) on PPI-P&C. To understand the impact of different types of uncertainty on P&C insurance premiums, the study also examines the relation of economic policy uncertainty (EPU), and geopolitical risk uncertainty (GPU) with PPI-P&C index. The time-frequency relation between the indices is examined using wavelet coherence analysis (WCA), whereas the casual dependency is examined using the non-parametric causality in quantiles (CIQ) approach and linear and non-linear Granger causality tests. WCA shows significant co-movement phases between CPU and PPI-P&C across time-frequency domain with CPU leading the PPI-P&C over a specific time interval. Results from CIQ give evidence of uncertainty indices having an asymmetric significant dependency relation with the PPI-P&C index. The results have implications for examining the impact of rising uncertainties on rising insurance costs for P&C insurance providers.

Suggested Citation

  • Aggarwal, Divya & Kalia, Deepali, 2022. "Examining comovement and causality between producer price index for P&C insurance premium and uncertainty indices: Wavelet and non-parametric quantile causality approach," Research in Economics, Elsevier, vol. 76(2), pages 141-148.
    • Handle: RePEc:eee:reecon:v:76:y:2022:i:2:p:141-148
    DOI: 10.1016/j.rie.2022.07.003
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    More about this item

    Keywords

    P&C insurance premium; Climate policy uncertainty; Wavelet coherence; Causality in quantiles;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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