Previous empirical studies prove that the insurance and banking sectors contribute to economic prosperity. This study investigated the complementary effect of insurance and banking sector development (BSD) on economic growth (EGs) in developing Asia. This study has chosen 11 Asian developing nations, including both lower-middle-income and upper-middle-income countries, from 1996 to 2021, leading to 286 observations. The study used the panel-corrected standard error (PESC) estimator for baseline results. The PCSE is applied as a baseline regression model because it is a robust method for analyzing panel data and addresses issues such as autocorrelation, heteroskedasticity, and cross-sectional dependence (CD). This study further deploys feasible generalized least squares (FGLS) and fixed-effect (FE) estimators to check the robustness of the empirical findings. The study’s findings reveal that life insurance premiums (LIPs), non-life insurance premiums (NLIPs), and total premiums (TPs) favorably affect economic prosperity in developing Asian nations. Similarly, the effect of BSD on EGs is favorable and robust in all baseline and robust regression models. The interaction terms between LIPs and lnPCGDP and between TPs and lnPCGDP are positive and statistically significant. Finally, unemployment has an unfavorable effect on EGs. This study concludes that the interaction term between insurance premiums and BSD positively impacts EGs and synergizes the positive effects of insurance penetration. Policymakers and regulators could give more attention to insurance penetration and BSD to stimulate EGs in developing Asia. Policymakers could encourage partnerships between banks and insurers to develop hybrid financial products (for instance, bancassurance), which speedily stimulate economic growth.
Budhathoki et al. (Fri,) studied this question.