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Investigate the Effect of Exchange Rate Volatility on the Demand for Life Insurance in Iran

Author

Listed:
  • Maryam Hosseinzadeh

    (Department of Economics, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran,)

  • Saeed Daei-Karimzadeh

    (Department of Economics, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran.)

Abstract

Numerous factors affect the insurance industry and its growth and development that comprehensive study and recognition about them and taking action to solve or control the negative effects of each one can in turn have a significant effect on the development of this potential market, particularly in the life insurances sector. One of the most important factors is the presence of some economic variables including exchange rate fluctuations in the economy of a country. Given the growing importance of variable exchange rate, especially in the current economic situation of Iran, the effect of exchange rate volatility on the demand for life insurance has been discussed in this study on a monthly basis during the period 1991-2012. Accordingly, the hybrid model of neural network and autoregressive conditional heteroscedasticity (ARCH) method for modeling and predicting the effect of exchange rate volatility on demand for life insurance have been used. The results showed that hybrid model of neural network group method of data handling and ARCH (1, 1), based on the criteria of root mean squared prediction error, significantly able to explain changes of exchange rate volatility on the demand for life insurance.

Suggested Citation

  • Maryam Hosseinzadeh & Saeed Daei-Karimzadeh, 2017. "Investigate the Effect of Exchange Rate Volatility on the Demand for Life Insurance in Iran," International Journal of Economics and Financial Issues, Econjournals, vol. 7(2), pages 166-174.
    • Handle: RePEc:eco:journ1:2017-02-22
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Exchange Rate; Demand for Life Insurance; Instability (Volatility); Neural Network Group Method of Data Handling; Autoregressive Conditional Heteroscedasticity;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C87 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Econometric Software

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