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Article
Publication date: 3 April 2018

Shrutikeerti Kaushal and Amlan Ghosh

Understanding the role of financial intermediaries towards financial development and thereby the growth of an economy, this study aims to examine the long-run relationship between…

671

Abstract

Purpose

Understanding the role of financial intermediaries towards financial development and thereby the growth of an economy, this study aims to examine the long-run relationship between the development of banking and insurance sector and economic growth in India by covering different regimes including the regulated and the liberalized period.

Design/methodology/approach

For examining the long-run relationship between these sectors, the study uses VAR-VECM technique. Further, Granger causality test is used to check if there is the presence of any causal link among these sectors.

Findings

The findings clearly indicate long-run relationship between economic growth and the development of banking and insurance sector, while the causality results show demand following relationship in the complete period where there is bi-directional causality in the post-liberalized period from insurance to economic growth.

Research limitations/implications

As banking development is not found to support economic growth, this raises serious concerns towards the complex role of banks as against theory and demands further analysis to understand their role in an economy.

Practical implications

As causality pattern has changed from demand following to bi-directional causality, it is vital to understand the importance of liberalization towards the economic growth of the country as well as the contribution of insurance sector towards economic growth in the liberalized environment.

Originality/value

This is the first effort to empirically explore the relationship between economic growth and the development of banking and insurance sector in India by covering the complete period (regulated and liberalized).

Details

Journal of Financial Economic Policy, vol. 10 no. 1
Type: Research Article
ISSN: 1757-6385

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Article
Publication date: 4 December 2017

Shrutikeerti Kaushal and Amlan Ghosh

The importance of banking and insurance, as an important part of the financial system, has been well accepted in the growth literature. Acting as financial intermediaries they…

684

Abstract

Purpose

The importance of banking and insurance, as an important part of the financial system, has been well accepted in the growth literature. Acting as financial intermediaries they perform important functions that may contribute in economic growth. Addressing this issue, the purpose of this paper is to empirically examine the relationship between banking, insurance and economic growth in India in the post-liberalized era when the private sector was allowed to operate banking and insurance business.

Design/methodology/approach

In order to find the long-run and short-run relationship between banking, insurance and economic growth, the study uses the VAR-vector error correction model (VECM) along with Granger causality test to explore any causal relationship.

Findings

The results indicate that there is the long-term relationship between banking, insurance and economic growth and the causality results show a bi-directional relationship between insurance activity and economic growth; however, banking is not granger cause of insurance or economic growth rather it is economic growth that cause banking development.

Research limitations/implications

The only limitation to the study is the non-availability of monthly figures of GDP. The study therefore, as suggested by RBI, uses monthly data set of Index of Industrial Production to measure economic growth.

Practical implications

The findings of the study give policy directions to the policymakers to make strategies that are conducive toward boosting development in insurance in order to achieve the targeted economic growth.

Originality/value

This work is the first attempt to study the conjoint relationship between banking, insurance and economic growth on the Indian economy after the reforms were initiated in the financial sector.

Details

International Journal of Social Economics, vol. 44 no. 12
Type: Research Article
ISSN: 0306-8293

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Book part
Publication date: 23 August 2023

Amlan Ghosh

The role of financial institutions and financial intermediaries in fostering economic growth (ECO) by improving the efficiency of capital accumulation, encouraging savings, and…

Abstract

The role of financial institutions and financial intermediaries in fostering economic growth (ECO) by improving the efficiency of capital accumulation, encouraging savings, and ultimately improving the productivity of the economy has been well established by the researchers. The reforms in the financial sector worldwide during the 1980s and 1990s were aimed at ushering in greater efficiency and more competitiveness.

The impact of financial market freedom (MF) on the overall development of the financial sector and thereby the growth in an economy is one of the most important considerations for policymakers over the years. This chapter aims to examine the causal relationship between financial MF and ECO in the Indian economy in the post-reform period.

Details

Contemporary Issues in Financial Economics: Evidence from Emerging Economies
Type: Book
ISBN: 978-1-80117-839-6

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Article
Publication date: 11 January 2013

Amlan Ghosh

The role of financial institutions and financial intermediaries in fostering the economic growth by improving the efficiency of capital accumulation, encouraging savings and…

1212

Abstract

Purpose

The role of financial institutions and financial intermediaries in fostering the economic growth by improving the efficiency of capital accumulation, encouraging savings and ultimately improving the productivity of the economy has been well accepted by now. Recent studies show that the insurance industry can improve the economic growth through financial intermediation, risk aversion and generating employment. This study aims to find the relationship between life insurance industry and economic development in India.

Design/methodology/approach

The study uses the VAR‐VECM model to find out the long run and short run relationship (if any) between life insurance growth and economic growth along with Granger causality test to suggest any causal relationship.

Findings

This study finds that there is long term relationship between life insurance industry and economic development in India. And the Granger causality test suggests that life insurance sector improves the overall economic development in India and the reverse is not significant.

Research limitations/implications

The only limitation to study the relationship between life insurance sector development and economic development is the data set which has been used is annual data as the quarterly data were not available for insurance industry.

Practical implications

The study documented the long run relationship between life insurance industry and economic development in India and finds that the life insurance sector improves the overall economic development in India. This would help us to understand the implications of the life insurance market development in the post reform era.

Originality/value

There is a dearth of literature on the Indian economy in relation to the insurance sector, specifically the life insurance sector. This is the first attempt to study the impact of life insurance development on Indian economy after the reforms initiated in the insurance sector.

Details

Journal of Asia Business Studies, vol. 7 no. 1
Type: Research Article
ISSN: 1558-7894

Keywords

Available. Content available
Book part
Publication date: 23 August 2023

Abstract

Details

Contemporary Issues in Financial Economics: Evidence from Emerging Economies
Type: Book
ISBN: 978-1-80117-839-6

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