Does Insurance Promote Economic Growth? Evidence from OECD Countries

Abstract

This article examines the short-and long-run dynamic relationships exhibited between economic growth and growth in the insurance industry for nine OECD countries. This is achieved by conducting a cointegration analysis on a unique set of annual data for real GDP and total real premiums issued in each country from 1961 to 1996. Causality tests are also conducted, which account for long-run trends within the data. The results from the tests suggest that in some countries, the insurance industry Granger causes economic growth, and in other countries, the reverse is true. Moreover, the results indicate that these relationships are country specific and any discussion of whether the insurance industry does promote economic growth will be dependent on a number of national circumstances.