IDEAS home Printed from https://ideas.repec.org/a/ids/ijmefi/v12y2019i3p233-247.html
   My bibliography  Save this article

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=100625
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Caldara, Dario & Fuentes-Albero, Cristina & Gilchrist, Simon & Zakrajšek, Egon, 2016. "The macroeconomic impact of financial and uncertainty shocks," European Economic Review, Elsevier, vol. 88(C), pages 185-207.
    2. Bordo, Michael D. & Duca, John V. & Koch, Christoffer, 2016. "Economic policy uncertainty and the credit channel: Aggregate and bank level U.S. evidence over several decades," Journal of Financial Stability, Elsevier, vol. 26(C), pages 90-106.
    3. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    4. Jae Sim & Egon Zakrajsek & Simon Gilchrist, 2010. "Uncertainty, Financial Frictions, and Investment Dynamics," 2010 Meeting Papers 1285, Society for Economic Dynamics.
    5. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    6. Xiao-lin Li & Mehmet Balcilar & Rangan Gupta & Tsangyao Chang, 2016. "The Causal Relationship Between Economic Policy Uncertainty and Stock Returns in China and India: Evidence from a Bootstrap Rolling Window Approach," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(3), pages 674-689, March.
    7. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
    8. Donghui Li & Fariborz Moshirian & Pascal Nguyen & Timothy Wee, 2007. "The Demand for Life Insurance in OECD Countries," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 74(3), pages 637-652, September.
    9. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-836, July.
    10. Christou, Christina & Cunado, Juncal & Gupta, Rangan & Hassapis, Christis, 2017. "Economic policy uncertainty and stock market returns in PacificRim countries: Evidence based on a Bayesian panel VAR model," Journal of Multinational Financial Management, Elsevier, vol. 40(C), pages 92-102.
    11. Antonakakis, Nikolaos & Chatziantoniou, Ioannis & Filis, George, 2012. "Dynamic Co-movements between Stock Market Returns and Policy Uncertainty," MPRA Paper 42905, University Library of Munich, Germany.
    12. Soon-Jae Lee & Soon Il Kwon & Seok Young Chung, 2010. "Determinants of Household Demand for Insurance: The Case of Korea," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 35(S1), pages 82-91, December.
    13. Arouri, Mohamed & Estay, Christophe & Rault, Christophe & Roubaud, David, 2016. "Economic policy uncertainty and stock markets: Long-run evidence from the US," Finance Research Letters, Elsevier, vol. 18(C), pages 136-141.
    14. Fredj Jawadi & Catherine Bruneau & Nadia Sghaier, 2009. "Nonlinear Cointegration Relationships Between Non‐Life Insurance Premiums and Financial Markets," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(3), pages 753-783, September.
    15. Thorsten Beck & Ian Webb, 2003. "Economic, Demographic, and Institutional Determinants of Life Insurance Consumption across Countries," The World Bank Economic Review, World Bank, vol. 17(1), pages 51-88, June.
    16. Rangan Gupta & Amine Lahiani & Chi-Chuan Lee & Chien-Chiang Lee, 2019. "Asymmetric dynamics of insurance premium: the impacts of output and economic policy uncertainty," Empirical Economics, Springer, vol. 57(6), pages 1959-1978, December.
    17. Arouri, Mohamed & Estay, Christophe & Rault, Christophe & Roubaud, David, 2016. "Economic policy uncertainty and stock markets: Long-run evidence from the US," Finance Research Letters, Elsevier, vol. 18(C), pages 136-141.
    18. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
    19. Kapetanios, George & Shin, Yongcheol & Snell, Andy, 2006. "Testing For Cointegration In Nonlinear Smooth Transition Error Correction Models," Econometric Theory, Cambridge University Press, vol. 22(2), pages 279-303, April.
    20. Perron, P., 1986. "Tests of Joint Hypotheses for Time Series Regression with a Unit Root," Cahiers de recherche 8632, Universite de Montreal, Departement de sciences economiques.
    21. Pástor, Ľuboš & Veronesi, Pietro, 2013. "Political uncertainty and risk premia," Journal of Financial Economics, Elsevier, vol. 110(3), pages 520-545.
    22. Zacharias Psaradakis & Martin Sola & Fabio Spagnolo, 2004. "On Markov error-correction models, with an application to stock prices and dividends," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(1), pages 69-88.
    23. Lee, Chien-Chiang & Chiu, Yi-Bin, 2012. "The impact of real income on insurance premiums: Evidence from panel data," International Review of Economics & Finance, Elsevier, vol. 21(1), pages 246-260.
    24. Lee, Chien-Chiang & Lee, Chi-Chuan & Zeng, Jhih-Hong & Hsu, Yu-Ling, 2017. "Peer bank behavior, economic policy uncertainty, and leverage decision of financial institutions," Journal of Financial Stability, Elsevier, vol. 30(C), pages 79-91.
    25. Mehmet Balcilar & Rangan Gupta & Chien-Chiang Lee & Godwin Olasehinde-Williams, 2017. "Economic Policy Uncertainty and Insurance," Working Papers 201776, University of Pretoria, Department of Economics.
    26. Saikkonen, Pentti, 2008. "Stability Of Regime Switching Error Correction Models Under Linear Cointegration," Econometric Theory, Cambridge University Press, vol. 24(1), pages 294-318, February.
    27. Jian Chen & Fuwei Jiang & Guoshi Tong, 2017. "Economic policy uncertainty in China and stock market expected returns," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57(5), pages 1265-1286, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    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. 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).
    4. Soyoung Lim & Phouphet Kyophilavong & Phongsili Soukchalern, 2024. "Insurance Development, Global Economic Policy Uncertainty and Geopolitical Risk: The Asymmetric Relationship Evidence from ASEAN-5," Journal of Asian Economic Integration, , vol. 6(2), pages 154-168, September.
    5. 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).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shabir Mohsin Hashmi & Muhammad Akram Gilal & Wing-Keung Wong, 2021. "Sustainability of Global Economic Policy and Stock Market Returns in Indonesia," Sustainability, MDPI, vol. 13(10), pages 1-18, May.
    2. Bakhtiar Javaheri & Fateh habibi & Ramin Amani, 2022. "Economic policy uncertainty and the US stock market trading: non-ARDL evidence," Future Business Journal, Springer, vol. 8(1), pages 1-10, December.
    3. Mehmet Balcilar & George Ike & Rangan Gupta, 2022. "The Role of Economic Policy Uncertainty in Predicting Output Growth in Emerging Markets: A Mixed-Frequency Granger Causality Approach," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(4), pages 1008-1026, March.
    4. Kundu, Srikanta & Paul, Amartya, 2022. "Effect of economic policy uncertainty on stock market return and volatility under heterogeneous market characteristics," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 597-612.
    5. Rangan Gupta & Amine Lahiani & Chi-Chuan Lee & Chien-Chiang Lee, 2019. "Asymmetric dynamics of insurance premium: the impacts of output and economic policy uncertainty," Empirical Economics, Springer, vol. 57(6), pages 1959-1978, December.
    6. Nguyen Phuc Canh & Udomsak Wongchoti & Su Dinh Thanh, 2021. "Does economic policy uncertainty matter for insurance development? Evidence from 16 OECD countries," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 46(4), pages 614-648, October.
    7. Serdar Ongan & Ismet Gocer, 2017. "Testing The Causalities Between Economic Policy Uncertainty And The Us Stock Indices: Applications Of Linear And Nonlinear Approaches," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 12(04), pages 1-20, December.
    8. Tihana Škrinjarić & Zrinka Orlović, 2020. "Economic Policy Uncertainty and Stock Market Spillovers: Case of Selected CEE Markets," Mathematics, MDPI, vol. 8(7), pages 1-33, July.
    9. Huang, Wei-Ling & Lin, Wen-Yuan & Ning, Shao-Lin, 2020. "The effect of economic policy uncertainty on China’s housing market," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    10. Cristiane Gea & Marcelo Cabus Klotzle & Luciano Vereda & Antonio Carlos Figueiredo Pinto, 2023. "Pricing uncertainty in the Brazilian stock market: do size and sustainability matter?," SN Business & Economics, Springer, vol. 3(1), pages 1-37, January.
    11. Yuan, Di & Li, Sufang & Li, Rong & Zhang, Feipeng, 2022. "Economic policy uncertainty, oil and stock markets in BRIC: Evidence from quantiles analysis," Energy Economics, Elsevier, vol. 110(C).
    12. Sabani, Nazmie & Bales, Stephan & Burghof, Hans-Peter, 2024. "On the different impact of local and national sources of policy uncertainty on sectoral stock volatility," Research in International Business and Finance, Elsevier, vol. 72(PB).
    13. Basher, Syed Abul & Haug, Alfred A. & Sadorsky, Perry, 2019. "The impact of economic policy uncertainty and commodity prices on CARB country stock market volatility," MPRA Paper 96577, University Library of Munich, Germany.
    14. Shao, Ying-Hui & Yang, Yan-Hong & Zhou, Wei-Xing, 2022. "How does economic policy uncertainty comove with stock markets: New evidence from symmetric thermal optimal path method," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 604(C).
    15. Muhammad Asif Khan & Masood Ahmed & József Popp & Judit Oláh, 2020. "US Policy Uncertainty and Stock Market Nexus Revisited through Dynamic ARDL Simulation and Threshold Modelling," Mathematics, MDPI, vol. 8(11), pages 1-20, November.
    16. Chen, Xiaoyu & Chiang, Thomas C., 2020. "Empirical investigation of changes in policy uncertainty on stock returns—Evidence from China’s market," Research in International Business and Finance, Elsevier, vol. 53(C).
    17. Simran, & Sharma, Anil Kumar, 2024. "Asymmetric nexus between economic policy uncertainty and the Indian stock market: Evidence using NARDL approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 93(C), pages 91-101.
    18. Omar, Ayman M.A. & Lambe, Brendan J & Wisniewski, Tomasz Piotr, 2021. "Perceptions of the threat to national security and the stock market," Journal of Economic Behavior & Organization, Elsevier, vol. 186(C), pages 504-522.
    19. Shuhua Xu & Md. Qamruzzaman & Anass Hamadelneel Adow, 2021. "Is Financial Innovation Bestowed or a Curse for Economic Sustainably: The Mediating Role of Economic Policy Uncertainty," Sustainability, MDPI, vol. 13(4), pages 1-18, February.
    20. Al-Thaqeb, Saud Asaad & Algharabali, Barrak Ghanim, 2019. "Economic policy uncertainty: A literature review," The Journal of Economic Asymmetries, Elsevier, vol. 20(C).

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:ijmefi:v:12:y:2019:i:3:p:233-247. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=218 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.