Does Insurance Promote Economic Development? Evidence from Bangladesh

Abstract

Purpose: The study strives to explore whether insurance companies contributes to the economic development of Bangladesh.
Methodology: To achieve the objective, this study employed time series data for the period of 1984-2021. FMOLS and DOLS analysis techniques along with granger causality test have been employed to investigate whether insurance can contribute to economic development.
Findings: This study found that insurance sector induces economic development of Bangladesh. Findings also indicate that gross capital formation, trades openness, and total debt have statistically significant positive impact while real interest rate, exchange rate, and population growth have significant negative effects on economic growth. Granger causality test reveals bidirectional causal affiliation between insurance and economic development.
Practical Implications: Findings of this research suggests that policy-makers and governments should make efforts to increase, encourage, and ensure the services to insurance policyholders which will lead to better financial performance of insurance industry that in turn will promote economic development of the country.
Originality/Value: This study explored the positive impacts of insurance industry on the economic development. No in-depth study was conducted in Bangladesh, particularly on exploring the positive effects of insurance industry.