The Insurance Industry Growth To Promote Economic Growth? Validation From China

Insurance has already become an important section in the modern economy. Insurance plays a more and more importance role in promoting economy, protecting economy, stabilizing society and so on. Because of the difference in every nation, the inner relationship between the development of insurance and the growth of the economy varies. However, the relationship between different kind of insurance market and the growth of economy is dissimilar with each other.During the last 20 years' development of insurance, the scale of industry in China has been formed and takes effects on economy. What is the relation between the development of insurance and the growth of economy in China? You will find the answer in this paper.This paper examines the short-and long-run dynamic relationships exhibited between economic growth and growth in the insurance industry in China. First, we examine the data of real GDP, total real premium, real life insurance premium and real property insurance premium. The result indicates that they are nonstationary I (1) variables. The next step of the analysis is to use Johansen cointegration tests. The result shows that the cointergrative relationship exhibits between real GDP and the kinds of real premium. Through the test, we found that there is a long-run relationship between economic growth and growth in the insurance industry. Based on the cointegrationary test results, we build some Error-Correction Models (ECM). Second, the causality tests from Vector Autoregressions (VAR) in levels and from Error-Correction Models are conducted respectively. The results show that there is evidence in favor of short-and long-run causality from GDP growth to the insurance premiums growth. Meanwhile, only total real premium can potentially have a long-run effect on real GDP. The results indicate that the development in insurance industry is demand-led through growth in the economy, and it is not very obvious that insurance industry promotes economic growth. At last, we concluded that the...