Insurance-growth nexus and macroeconomic determinants: evidence from middle-income countries

This paper examines the causal relationships between insurance market activities, economic growth, financial depth, and government consumption expenditure. We utilize a panel vector autoregressive model to test Granger causality for 18 middle-income countries over 1980-2012-a group that has not been previously studied in this literature. The results show a robust long-run economic relationship between insurance market activities, economic growth, financial depth, and government consumption expenditure. Moreover, in the short run, we find bidirectional causality between financial depth and economic growth, between financial depth and government consumption expenditure, and between insurance market activities and government consumption expenditure. Unidirectional causality exists from insurance market activities to economic growth, from financial depth to insurance market activities, and from government consumption expenditure to economic growth.