An investigation into the relationship between insurance activity and economic growth, using evidence from the United Kingdom

Abstract

The aim of this dissertation was to examine the association and causal relationship between insurance and economic growth. Econometric methods were employed in an investigation of the association and causal relationship between two proxies of insurance activity and real GDP in the UK, in order to examine the extent to which the theoretical relationships outlined in the relevant literature can be seen in the UK, for the period 1988-2009. Control variables were selected on the basis of relevant economic theory, and included in multivariate regression equations. Bivariate regression equations were also estimated, and Granger causality tests enabled some examination of the predictive relationship between insurance activity and economic growth in the UK. Some evidence of a supply-leading causal relationship is shown to exist; from one proxy of insurance activity to GDP growth, however the results found are limited, due to the scope and quality of the data used. Further research could consider examining larger data sets, and possibly extend the scope of this investigation through the use of alternative explanatory variables, or examining the relationship between insurance activity and economic growth in different countries, or different time periods.