The Relationship of Insurance and Economic Growth in Europe - A Theoretical and Empirical Analysis
Posted: 6 Aug 2008 Last revised: 9 Feb 2011
Date Written: August 5, 2008
The role of insurance companies, although growing in importance in financial intermediation, has received less attention than bank and stock markets and if so, mainly as a provider of risk transfer in single country or very heterogeneous samples. We investigate both the impact of insurance investment and premiums on GDP growth in Europe. We conduct a cross-country panel data analysis from 1992 to 2005 for 29 European countries. We find a positive impact of life insurance on GDP growth in the EU-15 countries, Switzerland, Norway and Iceland. For the New EU Member States from Central and Eastern Europe, we find a larger impact for liability insurance. Furthermore our findings emphasise the impact of the real interest rate and the level of economic development on the insurance-growth nexus. We argue that the insurance sector needs to be paid more attention in financial sector analysis and macroeconomic policy.
Keywords: Insurance, Financial intermediation, Economic growth, Finance-growth nexus
JEL Classification: E44, G22, O11, O16
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