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Development of financial market activities and economic growth: A cross-country evidence

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  • Chakraborty, Kalyan

    (University of Tampa, Florida, US)

Abstract

This paper examines the relationship between insurance market development and economic growth and various conditions that affect the insurance-growth nexus. The conditions tested are degree of financial development, banking activity, and demographic profile of a country. The empirical study uses cross country panel data from 90 countries for the period 1995 to 2015 and applies Hausman–Taylor random effect model. The main findings confirm a positive non-linear relationship between insurance market development and economic growth. The study also finds the impact of banking and stock market developments reduce the positive effect of insurance market activities on economic growth implying these activities are substitutes for insurance market promoting economic growth. Two major contributions for this study are: (i) it tests the hypothesis that the impact of insurance development on economic growth is non-linear, which implies at a higher level of economic development increased insurance spending would reduce economic growth; and (ii) it tests the hypothesis whether banking development and stock market activities are substitute or complement to insurance market development in the economic growth process.

Suggested Citation

  • Chakraborty, Kalyan, 2020. "Development of financial market activities and economic growth: A cross-country evidence," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 60, pages 26-47.
    • Handle: RePEc:ris:apltrx:0405
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    More about this item

    Keywords

    insurance; development; economic growth; dynamic; panel data; nonlinear.;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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