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Asymmetric dynamics of insurance premium: the impact of monetary policy uncertainty on insurance premiums in Japan

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  • Mehmet Balcilar
  • Godwin Oluseye Olasehinde-Williams
  • Muhammad Shahbaz

Abstract

By employing a non-linear autoregressive distributed lag (NARDL) model, this study investigates the effect of monetary policy uncertainty on insurance premium in Japan. Asides the confirmation of a long-run relationship between monetary policy uncertainty, insurance premium and real income, we also find that a positive relationship exists between monetary policy uncertainty and insurance premium. This shows that when economic policy uncertainty increases (decreases) then insurance premiums increases (decreases) in response. Moreover, we discovered that monetary policy uncertainty impacts insurance premium in an asymmetric way, such that negative changes have a bigger effect than positive changes on total insurance premium in Japan. We also found that real income has a significant and positive effect on insurance premium, and that the long run elasticity of insurance premium on real income is smaller than unit. This implies that insurance is a necessity and not a luxury in Japan.

Suggested Citation

  • Mehmet Balcilar & Godwin Oluseye Olasehinde-Williams & Muhammad Shahbaz, 2019. "Asymmetric dynamics of insurance premium: the impact of monetary policy uncertainty on insurance premiums in Japan," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 12(3), pages 233-247.
    • Handle: RePEc:ids:ijmefi:v:12:y:2019:i:3:p:233-247
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    Cited by:

    1. Lee, Chien-Chiang & Olasehinde-Williams, Godwin & Özkan, Oktay, 2023. "Geopolitical oil price uncertainty transmission into core inflation: Evidence from two of the biggest global players," Energy Economics, Elsevier, vol. 126(C).
    2. Mamadou Bah & Nelson Abila, 2024. "Institutional determinants of insurance penetration in Africa," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 49(1), pages 138-179, January.
    3. Godwin Olasehinde-Williams & Oktay Özkan, 2022. "Is interest rate uncertainty a predictor of investment volatility? evidence from the wild bootstrap likelihood ratio approach," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 46(3), pages 507-521, July.
    4. Balcilar, Mehmet & Gupta, Rangan & Lee, Chien-Chiang & Olasehinde-Williams, Godwin, 2020. "Insurance and economic policy uncertainty," Research in International Business and Finance, Elsevier, vol. 54(C).

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    More about this item

    Keywords

    monetary policy uncertainty; insurance premiums; NARDL; non-linear autoregressive distributed lag.;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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