DOES INSURANCE PROMOTE ECONOMIC GROWTH: THE EVIDENCE FROM EX-YUGOSLAVIA REGION

The aim of this paper is to examine the impact of insurance on economic growth and interaction of insurance and banking in promoting economic growth in ex-Yugoslavia region. We use the country-specific fixed effects models for panel data for the period 2004-2008 allowing each cross-sectional unit to have a different intercept term serving as an unobserved random variable that is potentially correlated with the observed regressors. The research results show that insurers provide positive effect on economic growth both as providers of insurance risk management and indemnification and as institutional investors. These results could be useful for regional governments that seek to improve economic growth as they suggest the need for implementation of stimulative policies for the development of insurance industry.