Can insurance ensure economic growth in an emerging economy? Fresh evidence from a non-linear ARDL approach
Journal of Financial Economic Policy
ISSN: 1757-6385
Article publication date: 3 October 2023
Issue publication date: 7 November 2023
Abstract
Purpose
This study aims to explore the nexus between insurance penetration and economic development in Vietnam, one of the fastest-growing economies over the past two decades.
Design/methodology/approach
This study uses an updated data set of the insurance sector in Vietnam from 1996 to 2020. The autoregressive lagging distribution and cointegrating non-linear autoregressive lagging distribution (NARDL) models are used to explore the nexus between the insurance market development and economic growth.
Findings
This study confirms the unidirectional causality and positive impacts of insurance market development on economic growth both in the short and long term, supporting the “supply-leading” hypothesis. Nonlife insurance has more significant but slower impacts on contributing to economic development in the long run. From the NARDL approach, this study also discloses the asymmetric relationship between the insurance industry and economic growth. Aggregate and life insurance display short- and long-term asymmetric impacts, whereas nonlife insurance shows long-term asymmetry.
Originality/value
To the best of the authors’ knowledge, this is the first study to examine the hidden asymmetries of the insurance-growth nexus in Vietnam from non-linear models. Notwithstanding the theoretical contributions to the prior literature, several practical implications are proposed for insurance businesses, policymakers and investors.
Keywords
Acknowledgements
The authors are indebted to Martin Nguyen (Shanghai University), Vanessa Dinh (Swinburne University of Technology), An Huynh (VNU-HCM), Tracey Nguyen (Monash University), Wang Na (Macquarie University) and conference participants at the First Annual Meeting of the International Society for the Advancement of Financial Economics (ISAFE-2022) – Vietnam, 2021 International Conference on Accounting, Auditing and Finance (ICAAF 2021) – University of Western Australia; Vietnamese Economics Research Forum Seminar Series for their valuable comment and suggestions. Quang Thien Tran would also like to acknowledge that this paper was funded by Van Lang University, Ho Chi Minh City, Vietnam.
Citation
Tran, Q.T. and Huynh, N. (2023), "Can insurance ensure economic growth in an emerging economy? Fresh evidence from a non-linear ARDL approach", Journal of Financial Economic Policy, Vol. 15 No. 6, pp. 596-612. https://doi.org/10.1108/JFEP-05-2023-0125
Publisher
:Emerald Publishing Limited
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