IDEAS home Printed from https://ideas.repec.org/a/bla/jrinsu/v70y2003i3p489-508.html
   My bibliography  Save this article

An Empirical Study on the Lapse Rate: The Cointegration Approach

Author

Listed:
  • Weiyu Kuo
  • Chenghsien Tsai
  • Wei‐Kuang Chen

Abstract

We use the cointegration technique to reexamine the contending lapse rate hypotheses: the emergency fund hypothesis and the interest rate hypothesis. We find that the unemployment rate affects the lapse rate in both the long and short run, whereas the interest rate causes variations in the lapse rate mainly in the long run. This evidence seems to be in favor of the emergency fund hypothesis. However, according to the impulse response analysis of the estimated error‐correction model, the interest rate overwhelms the unemployment rate on the overall impact on the dynamics of lapse rate. In other words, the interest rate hypothesis is favored against the emergency fund hypothesis in the sense that the interest rate is more economically significant than the unemployment rate in explaining the lapse rate dynamics.

Suggested Citation

  • Weiyu Kuo & Chenghsien Tsai & Wei‐Kuang Chen, 2003. "An Empirical Study on the Lapse Rate: The Cointegration Approach," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 70(3), pages 489-508, September.
    • Handle: RePEc:bla:jrinsu:v:70:y:2003:i:3:p:489-508
    DOI: 10.1111/1539-6975.t01-1-00061
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1539-6975.t01-1-00061
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1539-6975.t01-1-00061?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jrinsu:v:70:y:2003:i:3:p:489-508. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/ariaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.