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The synergistic effect of insurance and banking sector activities on economic growth in Africa

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  • Balcilar, Mehmet
  • Gupta, Rangan
  • Lee, Chien-Chiang
  • Olasehinde-Williams, Godwin

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 generalized method of moments (GMM) estimation technique, this paper evaluates the synergistic effect of both sectors on economic growth in a panel of 10 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 bootstrap panel causality tests. The results show that the life insurance market and the banking sector, as well as the non-life insurance market and the banking sector, are 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.

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  • Balcilar, Mehmet & Gupta, Rangan & Lee, Chien-Chiang & Olasehinde-Williams, Godwin, 2018. "The synergistic effect of insurance and banking sector activities on economic growth in Africa," Economic Systems, Elsevier, vol. 42(4), pages 637-648.
  • Handle: RePEc:eee:ecosys:v:42:y:2018:i:4:p:637-648
    DOI: 10.1016/j.ecosys.2018.08.002
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    Keywords

    Synergistic effect; Insurance market; Banking sector; Africa; Dynamic GMM; Panel granger causality;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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