Does insurance market impact the economic growth? Evidence from Albania

Sha ku, Gen iana; Kumi, E is A icle Does insu ance ma ke impac he economic g ow h? E idence om Albania The Eu opean Jou nal o Compa a i e Economics (EJCE) P o ided in Coope a ion wi h: Uni e si y Ca lo Ca aneo (LIUC), Cas ellanza Sugges ed Ci a ion: Sha ku, Gen iana; Kumi, E is (2021) : Does insu ance ma ke impac he economic g ow h? E idence om Albania, The Eu opean Jou nal o Compa a i e Economics (EJCE), ISSN 1824-2979, Uni e si y Ca lo Ca aneo (LIUC), Cas ellanza, Vol. 18, Iss. 2, pp. 267-289, h ps://doi.o g/10.25428/1824-2979/001 This Ve sion is a ailable a : h ps://hdl.handle.ne /10419/320173 S anda d-Nu zungsbedingungen: Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen Zwecken und zum P i a geb auch gespeiche und kopie we den. Sie dü en die Dokumen e nich ü ö en liche ode komme zielle Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich machen, e eiben ode ande wei ig nu zen. So e n die Ve asse die Dokumen e un e Open-Con en -Lizenzen (insbesonde e CC-Lizenzen) zu Ve ügung ges ell haben soll en, gel en abweichend on diesen Nu zungsbedingungen die in de do genann en Lizenz gewäh en Nu zungs ech e. Te ms o use: Documen s in EconS o may be sa ed and copied o you pe sonal and schola ly pu poses. You a e no o copy documen s o public o comme cial pu poses, o exhibi he documen s publicly, o make hem publicly a ailable on he in e ne , o o dis ibu e o o he wise use he documen s in public. I he documen s ha e been made a ailable unde an Open Con en Licence (especially C ea i e Commons Licences), you may exe cise u he usage igh s as speci ied in he indica ed licence. h ps://c ea i ecommons.o g/licenses/by-nd/4.0/ The Eu opean Jou nal o Compa a i e Economics Vol. 18, no. 2, pp. 267-289 ISSN 1824-2979 h p://dx.doi.o g/10.25428/1824-2979/001 Fi s published online: 27/08/2021 Does insu ance ma ke impac he economic g ow h? E idence om Albania Gen iana Sha ku*, E is Kumi** Abs ac Insu ance plays a signi ican ole in he economy de elopmen all o e he wo ld, being an impo an sou ce o capi al accumula ion and in es men . This pape s udies he long un dynamic ela ions be ween economic g ow h and he insu ance ma ke in Albania. Using seconda y qua e ly da a om 2005 o 2018, we ha e aken in o conside a ion h ee main indica o s o he insu ance ma ke : (i) li e and non-li e insu ance olume; (ii) li e and non-li e insu ance densi y and (iii) li e and non-li e insu ance pene a ion index. The da a analysis is ca ied h ough Johansen’s ec o e o -co ec ion model. The indings o he s udy e ealed no long un ela ion be ween economic g ow h and insu ance ma ke , when he employed indica o s a e he p emium olume and he pene a ion index. On he o he hand, when he insu ance ma ke is measu ed by he densi y index, we ound a long un nega i e ela ion be ween g ow h and li e insu ance ac i i y and a long un posi i e ela ionship be ween g ow h and non-li e insu ance ac i i y. JEL classi ica ion: G22, F43 Keywo ds: Insu ance ma ke , Economic g ow h, Albania 1. In oduc ion Albania is a coun y ha has expe ienced a long ansi ion, a e he beginning o he e o ms in 1990. Insu ance ma ke has no been a p io i y o he economic e o ms in he i s decade. Acco ding o he s a is ics o he Insu ance Commission (Albanian Financial Supe iso y Au ho i y a he p esen ), he p emium pe capi a in 1999 was only USD 4.2, while in 2018 i has been inc eased mo e han en old. The insu ance ma ke in Albania is signi ican ly de eloped in he second decade o ansi ion pe iod. The numbe o insu ance companies has been inc eased, he o eign capi al en e ed, he legisla ion was signi ican ly imp o ed e c. The insu ance ma ke in Albania has always been domina ed by non-li e insu ance p oduc s. In 2019, he li e insu ance ac i i y sha ed abou 7% o o al insu ance ac i i y. The s uc u e o he insu ance ma ke in Albania has been changed om he s a e monopoly (un il 1999) o oligopoly (up o 2002) and hen o monopolis ic compe i ion (du ing he las decade) acco ding o * Uni e si y o Ti ana, Facul y o Economics, Albania, gen ianasha ku@ eu .edu.al ** Me opoli an Uni e si y, Ti ana, Albania, ekumi@um .edu.al Acknowledgemen : We would like o exp ess ou g a i ude o he EJCE Edi o s, M . Ma eo Migheli and M . Gio anni Ramello, o hei a ailabili y since he submission o he manusc ip . Also, we would like o hank he anonymous e iewe s o sha ing hei opinions and helping us imp o ing he pape . EJCE, ol. 18, no. 2 (2021) A ailable online a h ps://ejce.liuc.i 268 Sha ku & Shehu (2016). Howe e , he compe i ion deg ee a ies wi hin he classes and ac i i ies o he insu ance ma ke . Among li e and non-li e insu ance, he li e insu ance ac i i y is mo e concen a ed han he non-li e insu ance ma ke , due o he small numbe o insu ance companies ope a ing in he li e insu ance ma ke . Many academics and p ac i ione s in Albania ha e explo ed he ac o s ha in luence he economic de elopmen in Albania, such as o eign di ec in es men , emi ances, banking sec o , mone a y policy, iscal policy e c. Bu e y ew o hem ha e included he insu ance ac i i y as a po en ial a iable o economic de elopmen . The la e de elopmen o he insu ance sec o in Albania, may be one o he easons ha i is no conside ed in hei s udies. Howe e , he in e na ional li e a u e sugges s ha a ela ionship be ween economic de elopmen and insu ance ac i i y may exis e en in de eloping coun ies like Albania. The aim o his a icle is o explo e he ela ionship be ween insu ance ac i i y and economic g ow h, conside ing bo h he segmen s: li e and non-li e insu ance and economic de elopmen . The li e a u e e iew ega ding his ela ionship is summa ized in he i s sec ion o he a icle. The second sec ion p esen s he me hodology and he da a base used in he s udy and he hi d sec ion discusses he indings. The inal sec ion con ains some conclusions ega ding he insu ance ma ke in Albania. 2. Li e a u e Re iew The ela ionship be ween economic g ow h and insu ance indus y is subjec o many au ho s, s udying he da a in di e en coun ies and in di e en economic de elopmen pe iods. In his s udy, we classi y he au ho s and hei indings acco ding he o he economic de elopmen o he coun ies aken in conside a ion, s a ing wi h Wa d & Zub uegg (2000), who in oduced a s udy ha ep esen s a g ea con ibu ion o examine he dynamic ela ionship be ween economic g ow h and inc ease in he insu ance indus y o nine OECD coun ies. They used a unique se o annual da a o eal GDP and o al eal p emiums, om 1961 o 1996, o each coun y. The G ange causali y es sugges s ha in some OECD coun ies, he insu ance indus y causes economic g ow h, bu in o he coun ies he e e se e ec . Only o he UK and USA he au ho s e ealed an insigni ican ela ionship. Kugle & O ogi (2005) s udied he UK da a o he pe iod 1966-2003. The models hey used o in es iga e he long- un Gen iana Sha ku, E is Kumi, Does insu ance ma ke impac he economic g ow h? E idence om Albania A ailable online a h ps://ejce.liuc.i 269 ela ionship be ween insu ance ma ke and economic g ow h, we e based on disagg ega ed da a. They used Johansen’s coin eg a ion es and G ange causali y, and hei empi ical analysis e ealed a posi i e long- un ela ionship be ween GDP and he size o he insu ance sec o , which is cha ac e ized as bidi ec ional. I is impo an o men ion Kugle & O ogi (2005) ealized ha Wa d & Zub uegg (2000) concluded insigni ican esul s, because hey used agg ega e da a (li e and non-li e p emiums). Di e en ly om p e ious au ho s, Adams e al. (2009), examined he dynamic ela ion be ween comme cial bank ac i i y, insu ance and economic g ow h only in one coun y, in Sweden o he pe iod 1830 o 1998, using ime-se ies da a and pe o ming es s o G ange causali y. The s udy concluded ha insu ance has G ange -caused economic g ow h and bank lending. Fu he mo e, he insu ance sec o has a posi i e e ec on economic g ow h only in he high economic de elopmen pe iods. La e on, Ege & Bahadi (2011) explo ed he ole o insu ance in changing economic g ow h using da a o wen y-nine coun ies om 1999 o 2008 (Aus alia, Aus ia, Belgium, Canada, Czech Republic, Denma k, Finland, F ance, Ge many, G eece, Hunga y, Iceland, I eland, I alia, Japan, Tu key, Sou h Ko ea, Luxembu g, Mexico, Holland, No way, Poland, Po ugal, Slo akia, Spain, Sweden, Swi ze land, England and USA). The panel da a analysis e ealed a posi i e ela ionship be ween insu ance and economic g ow h. Chang e al. (2014) applied boo s apping G ange causali y model o e a pe iod o 1979–2006, o 10 OECD o examine he ela ionship be ween insu ance and economic g ow h. Thei indings we e no uni o m o all he coun ies included in he s udy. While P adhan a al. (2017) explo ed he causal ela ionship be ween insu ance ma ke pene a ion and economic g ow h pe capi a in 19 Eu ozone coun ies o he pe iod 1980–2014. Employing G ange causali y, he esul s we e mos ly non-uni o m ac oss he Eu ozone coun ies du ing his selec ed pe iod. Despi e he low le el o de elopmen , he e a e a lo o au ho s ha ha e s udied he ela ionship be ween economic g ow h and he insu ance ma ke in de eloping coun ies. Ve ma & Bala (2013) based on he O dina y Leas Squa e eg ession model, examined he ela ionship be ween he li e insu ance and economic g ow h in India o he ime pe iod 1990 o 2011. The indings o he s udy concluded ha li e insu ance EJCE, ol. 18, no. 2 (2021) A ailable online a h ps://ejce.liuc.i 270 signi ican ly in luences he economic g ow h o India. These indings a e in line wi h Ghosh (2013) and Din e al. (2017) o India and Chau e al. (2013) o Malasyia. Olayungbo & Akinlo (2016) and Alhassan, A.L. (2016) s udied he ela ionship be ween insu ance and economic g ow h in A ican coun ies ( i e ou o eigh coun ies we e he same in bo h s udies). Olayungbo & Akinlo (2016) ocused hei esea ch in eigh A ican coun ies o he pe iod o 1970–2013. The s udy showed posi i e ela ionships o Egyp , while sho - un nega i e and long- un posi i e e ec s we e ound o Kenya, Mau i ius, and Sou h A ica. On he con a y, nega i e e ec s we e ound o Alge ia, Nige ia, Tunisia, and Zimbabwe. On he o he hand, Alhassan (2016), e ealed a long- un ela ionship be ween insu ance ma ke ac i i ies and economic g ow h o Kenya, Mau i ius, Mo occo, Nige ia and Sou h A ica. Omoke (2011) s udied he impac o he insu ance ma ke in Nige ia on economic g ow h o a pe iod be ween 1970 and 2008. Con a y o he indings o Olayungbo & Akinlo (2016) and Alhassan (2016), he insu ance sec o did no e eal any posi i e and signi ican impac on economic g ow h in Nige ia wi hin he pe iod o s udy. Akinlo & Apanisile (2014), s udied he ela ionship be ween insu ance and economic g ow h in sub-Saha an A ica o e he pe iod 1986-2011. The au ho s ound ha insu ance has a posi i e and signi ican impac on economic g ow h in sub-Saha an A ica. The e ec o he insu ance sec o in he economic de elopmen o Tu key has been examined by Yildi im (2015). He employed he G ange Causali y Tes and VAR Model using imes e da a be ween 2006-2014 yea s. He ound a posi i e ela ionship be ween he economic de elopmen and insu ance sec o . C is ea e al. (2014) aimed o es ablish he co ela ion be ween insu ance and economic g ow h in Romania, o he pe iod 1997-2012, based on s a is ical me hods conce ning he analysis be ween he GDP and insu ance indica o , aking in o conside a ion insu ance pene a ion and insu ance densi y. As a conclusion, hey ound ou he li e insu ance is a ec ing mo e signi ican ly he GDP pe capi a, compa ed wi h he non-li e insu ance. The impac o insu ance ma ke in economic g ow h in he ex- Yugosla ia egion is es ed by Njegomi & S ojić (2010). They used he coun y-specific ixed e ec s models o panel da a o he pe iod 2004-2008. The analysis e ealed a posi i e e ec o insu ance on economic g ow h. Kjose ski (2011) s udied he ela ionship o insu ance and economic g ow h o Macedonia, o he pe iod 1995– Gen iana Sha ku, E is Kumi, Does insu ance ma ke impac he economic g ow h? E idence om Albania A ailable online a h ps://ejce.liuc.i 271 2010, using he mul iple eg ession models. Wi h he scope o sol e he model i was used he echnique o leas squa es, ollowed by analysis o a iabili y in o de o iden i y he e ec s o each a iable. He used h ee di e en insu ance a iables - li e insu ance, non-li e insu ance and o al insu ance pene a ion, and he concluded ha he o al insu ance indus y and non-li e insu ance ha e a posi i e and signi ican e ec on economic g ow h o Macedonia. Li e insu ance a ec s he economic g ow h o Macedonia signi ican ly, bu in a nega i e way. Few esea che s ha e s udied he ela ion be ween he insu ance ma ke and economic de elopmen in Albania. Madani and Bazini (2017) ha e s udied how he Albanian insu ance ma ke is in luenced by he economic g ow h and o he ac o s such as in la ion, educa ion o popula ion, popula ion g ow h, go e nmen policies, p i a e in es men , e c. Using insu ance pene a ion indica o s om 1999 o 2013, hey ound ha economic g ow h nega i ely a ec s he endency o Albanian ci izens on he eques o p oduc s o he li e insu ance indus y. Kalaja a al. (2017) ha e examined he impac o he insu ance ma ke on economic de elopmen in Albania. Using insu ance densi y indica o s, o he pe iod 2006-2015, he au ho s ha e ound e idence o a posi i e e ec o he de elopmen o he li e and non-li e insu ance ma ke s on economic g ow h and ha economic g ow h is nega i ely a ec ed by sa ings and he in la ion a e. On he o he hand, Zyka & My a aj (2014) in hei s udy, ound an insigni ican ole o he insu ance ma ke in Albanian economy. The composi ion o he insu ance ma ke in luences he impac ha each insu ance segmen may ha e in economic de elopmen . The insu ance ac i i y ha is he la ges pa o he ma ke may signi ican ly d i e he esul . A ena (2008), e i ying i he e is a causal ela ionship be ween insu ance ma ke ac i i y and economic g ow h o 55 coun ies, du ing he pe iod 1976 – 2004, concluded ha bo h li e and non-li e insu ance ha e posi i e and signi ican causal e ec s on economic g ow h. Fo li e insu ance, high-income coun ies d i e he esul s, and o non-li e insu ance, bo h high-income and de eloping coun ies d i e he esul . Haiss & Sümegi (2008), in o de o s udy he ela ionship be ween insu ance and economic g ow h, applied a panel da a analysis o e he pe iod 1992-2005, o 29 coun ies o OECD. They ound ou ha Fo he New EU Membe S a es om Cen al and Eas e n Eu ope, he economic g ow h is impac ed mo e om liabili y insu ance, compa ed wi h he o he coun ies ha li e EJCE, ol. 18, no. 2 (2021) A ailable online a h ps://ejce.liuc.i 272 insu ance played a mo e impo an ole. I is explained by he ac ha he mo o hi d pa y liabili y cons i u es he la ges pa o he o al insu ance ma ke in Cen al and Eas e n Eu ope coun ies. The ela ion o he insu ance ma ke , especially he li e insu ance one, wi h economic de elopmen depends on he de elopmen and he cha ac e is ics o he inancial sys em o a speci ic coun y. Oued aogo e al. (2016), es ed he ela ion be ween he de elopmen o he li e insu ance sec o and economic g ow h, o a sample o 86 de eloping coun ies o e he pe iod 1996-2011. He concluded ha he ma ginal posi i e impac o he de elopmen o li e insu ance dec eases wi h he le els o deposi in e es a e, bank c edi and s ock ma ke alue aded, while he e ec is g ea e in coun ies wi h high-quali y ins i u ions. Webb a al. (2002) used a c oss sec ion analysis o s udy he posi i e e ec o he bank and insu ance sec o on economic g ow h, in 55 de eloping and de eloped coun ies. He disco e ed ha he e ec o bank and insu ance ma ke s oge he is s onge han when measu ed independen ly om each o he . Din a al. (2017) ha e es ed he ela ionship be ween insu ance and economic g ow h o six (de eloped, eme ging and de eloping) coun ies o e he pe iod o 1980 o 2015. The au ho s concluded a significan and posi i e ela ionship be ween non-li e insu ance and economic g ow h in he sho - un o he all he coun ies aken in conside a ion, while he ela ionship be ween li e insu ance and economic g ow h is no uni o m among he coun ies conside ed in he s udy. I is di icul o come o a conclusion ega ding he indings o he s udies which explo e he ela ionship be ween insu ance ma ke and economic g ow h. Se e al au ho s ha e applied di e en s a is ical es s and models as well as di e en indica o s o measu ing economic g ow h and he insu ance ma ke . This may be one o he easons ha he esea ch esul s a e non-uni o m e en among coun ies a he same le el o de elopmen . 3. Me hodology and da a selec ion The ocus o his s udy is o examine he long un dynamic ela ions be ween economic g ow h and he insu ance ma ke in Albania, using Johansen’s ec o e o - co ec ion model. Al hough he Engle & G ange (1987) p ocedu e can be implemen ed, i is less e icien when using h ee o mo e a iables. In es ing h ee o Gen iana Sha ku, E is Kumi, Does insu ance ma ke impac he economic g ow h? E idence om Albania A ailable online a h ps://ejce.liuc.i 273 mo e a iables, mo e han one coin eg a ion ec o may be expec ed, and as Ende s (2014) explains, he me hod has no sys ema ic p ocedu e o he es ima ion o mul iple coin eg a ing ec o s. We i s pe o m he augmen ed Dickey – Fulle (ADF) o es o s a iona i y and uni oo s o a iables in bo h le el and i s di e ence ollowed by Phillips-Pe on es o check o majo al e a ions. In o de o es o coin eg a ion and es ima e he VECM, all a iables mus be in eg a ed o o de one I(1), hence being s a iona y a i s di e ence. A e es ing o s a iona i y, we pe o m a es o de e mine he lag leng h s uc u e, elying on mul iple c i e ia mainly including Akaike In o ma ion C i e ion (AIC), Schwa z In o ma ion C i e ion (SC) and Hannan-Quinn In o ma ion C i e ion (HQ). The e o e, we pe o m he Johansen (1988) coin eg a ion es o de e mine he exis ence o one o mo e coin eg a ion ec o s, since all he hypo heses in conside a ion consis o h ee a iables. The coin eg a ion es will he e o e de e mine he ank o λ=αβ’. Ha ing de e mined he o de o coin eg a ion, we es ima e a VECM and examine he coin eg a ing ec o and he speed o adjus men s o he pa ame e s. Assuming he e a e mul iple coin eg a ing ec o s, we will selec one coin eg a ing ec o , o he eigen ec o based on he la ges eigen alue. I is impo an o no e ha i he e a e mo e han one coin eg a ion ela ionships in a h ee- a iable sys em, he e exis one coin eg a ing ec o o each subse (Ende s, 2014). A las , we in e p e he ele an coin eg a ing ec o and he speed o adjus men coe icien . The a iables included in his s udy a e G ow h, LLI, LNI, LID, NID, LIPI, and NIPI. The G ow h a iable e ie ed om he INSTAT (Na ional Ins i u e o S a is ics o Albania) na ional accoun s ime se ies, while li e and non-li e insu ance olumes we e accessed a AFSA (Albanian Financial Supe iso y Au ho i y). As he scope o he a icle is o s udy he long un ela ionship be ween he insu ance ma ke and economic g ow h, we use ake in o conside a ion h ee main indica o o he insu ance ma ke : (i) li e and non-li e insu ance olume; (ii) li e and non-li e insu ance densi y; and (iii) li e and non-li e insu ance pene a ion index. The li e and non-li e insu ance olumes a e ans o med o gene a e he a iables o in e es . Table 1 p o ides he lis o a iables and hei de ini ions. EJCE, ol. 18, no. 2 (2021) A ailable online a h ps://ejce.liuc.i 274 Table 1:De ini ions o a iables Va iable Name De ini ion o a iables G ow h Economic g ow h (in pe cen age) LLI Na u al loga i hm o olume o li e insu ance p emium LNI Na u al loga i hm o olume non-li e insu ance p emium LIDR Li e insu ance densi y a e – li e insu ance p emium olume pe capi a (in Eu o pe capi a) NIDR Non-li e insu ance densi y a e – non-li e insu ance p emium olume pe capi a (in Eu o pe capi a) LIPR Li e insu ance pene a ion a e – li e insu ance p emium olume o GDP a io (in pe cen age) NIPR Non-li e insu ance pene a ion a e – non-li e insu ance p emium olume o GDP a io (in pe cen age) The olumes a e a i s con e ed in o na u al loga i hms, o gene a e LLI and LNI. The li e and non-li e insu ance densi y is hen calcula ed as he olume pe capi a (LID and NID) whe eas he li e and non-li e insu ance pene a ion a e is calcula ed as he a io o he p emium olume o he g oss domes ic p oduc (also e ie ed om INSTAT) a a gi en ime (LIPR and NIPR). Table 2 p o ides he summa y s a is ics o he a iables in hei inal o m. Table 2: Desc ip i e s a is ics o a iables Va iable Name Mean S d De Min Max G ow h 5.944 3.911 -1.811 13.521 LLI 14.097 0.517 12.370 14.782 LNI 16.513 0.418 15.659 17.288 LIDR 5.552 2.423 0.015 11.195 NIDR 0.506 0.204 0.901 0.078 LIPR 0.061 0.018 0.094 0.374 NIPR 0.674 0.189 1.117 2.094 We ocus on he pe iod o ime om he i s qua e o 2005 up un il he second qua e o 2018. Conside ing he na u e o he s udy and he na u e o he insu ance ma ke in Albania, we included qua e ly da a, as annual da a would mean ha ing ew obse a ions a ailable o an e icien es ima ion. As desc ibed in he sec ion II, he ma ke insu ance in Albania has been ob iously de eloped only a e 2005, due o he imp o emen o insu ance legal amewo k, ma ke libe aliza ion and eo ganiza ion o he insu ance ma ke s uc u es. Gen iana Sha ku, E is Kumi, Does insu ance ma ke impac he economic g ow h? E idence om Albania A ailable online a h ps://ejce.liuc.i 281 somehow la ge, hus we ake in conside a ion he ci cums ance in which he use o many lags is accompanied wi h he p oblems o losing many obse a ions. Table 9: P e-es ima ion lag o de selec ion s a is ics Lag LR FPE AIC SC HQ 4 32.275 0.042 5.308 6.844* 5.886* 7 17.459* 0.041* 5.083* 7.681 6.060 Figu e 3 displays he end o LIDR and NIDR se ies. LIDR shows a clea and con inuous upwa d end ac oss all he sequence, while NIDR show a mino upwa d end a he s a , which con inues o g ow app oxima ely a e he middle o he se ies up o he end. Consequen ly, his sugges s he inclusion o he de e minis ic end in u he es ima ions. Figu e 3: T end o a iables T end o LIDR T end o NIDR Table 10 ep esen s he esul s o he Johansen es s o G ow h, LIDR and NIDR. Acco ding o he ace s a is ic, a 5% le el o signi icance (almos a 1% le el o signi icance), no mo e han wo coin eg a ing ec o s exis . Acco ding o he Maximum – Eigen S a is ic, a 5% le el o signi icance no mo e han one coin eg a ing ec o s exis be ween he selec ed a iables. In any case, as p e iously s a ed, when he e is mo e han one coin eg a ing ec o , he i s eigen ec o which is based on he la ges eigen alue is ega ded as he mos use ul o u he analysis. EJCE, ol. 18, no. 2 (2021) A ailable online a h ps://ejce.liuc.i 282 Table 10: Johansen coin eg a ion es Hypo hesized No. o CE(s) Eigen alue T ace S a is ic p- alue Max-Eigen S a is ic p- alue None 0.555 68.136 0.000* 37.244 0.001* A mos 1 0.334 30.891 0.011* 18.706 0.062 A mos 2 0.233 12.185 0.057 12.185 0.057 A e concluding he p esence o coin eg a ion be ween a iables, we ollow he analysis by es ima ing he VECM including one coin eg a ion equa ion. Annex 1 ep esen s he es ima es o he VECM. Rega ding he i s equa ion o he sys em and conside ing he e o co ec ion e m ECT -1=1.000G ow h -1 +25.893 LIDR -1 - 1.232 NIDR -1 + 0.022 T end - 13.065, he esul s show ha he p e ious yea de ia ion o economic g ow h om he long un equilib ium is co ec ed in he cu en pe iod a a speed o 62.3%. The magni ude o he speed o adjus men mechanism o he long- un equilib ium is ela i ely high, which implies ha he p ocess is highly expec ed o con e ge in he long- un. The speed o adjus men is 14.6% o he second equa ion, and only 0.9% o he hi d equa ion. Fu he mo e, he speed o adjus men coe icien is signi ican a 5% le el only o he i s and he hi d equa ion. Focusing on he i s equa ion, he coin eg a ing ec o is gi en by β’1= (1.000, 25.893, -1.232, 0.022, -13.065), which gi es he ollowing coin eg a ing ela ionship: G ow h = -25.893 LIDR + 1.232 NIDR -0.022 T end +13.065 The coin eg a ion equa ion sugges ha he e exis in he long- un a nega i e ela ion be ween g ow h and li e insu ance densi y, while on con a y a posi i e ela ion wi h non-li e insu ance. As he non-li e insu ance ac i i y domina es he insu ance ma ke in Albania (i consis ed abou 93 pe cen o agg ega e insu ance ma ke in 2017), i is expec ed a posi i e ela ionship be ween economic g ow h and non-li e insu ance. Rega ding he long- un nega i e ela ion be ween g ow h and non-li e insu ance, i is in line wi h he indings o Kjosje ski (2011) o Macedonia. This esul may be explained by he ac ha he inancial sys em in Albania is a bank-based sys em, and he sa ing cul u e p e ails o e he insu ance cul u e o he Albanians. On he o he hand, when conside ing he sho - un coe icien s, LID has a posi i e e ec on g ow h, while NID has a nega i e e ec on g ow h. Howe e , mos o he LID sho - un coe icien s, Gen iana Sha ku, E is Kumi, Does insu ance ma ke impac he economic g ow h? E idence om Albania A ailable online a h ps://ejce.liuc.i 283 excep he i s lag and su p isingly he las lag, a e no signi ican , and all o he NID sho - un coe icien s a e no signi ican . To check he s abili y o he model we un a pos es ima ion es , pa icula ly con olling o no mali y, au oco ela ion and he e oscedas ici y. The LM es o se ial co ela ion could no ejec he null hypo hesis o no se ial co ela ion a 7 lags and a 5% le el o signi icance (Annex 2), he e o e we conclude he model su e s no au oco ela ion p oblem. We u he pe o m he Ja que-Be a es o no mali y (Annex 3). A 5% le el o signi icance, we canno ejec he null hypo hesis, hence we conclude ha he esiduals a e no mally dis ibu ed. A las , we pe o m he he e oscedas ici y es (Annex 4), which shows ha a 5% le el o signi icance we ail o ejec he null hypo hesis o cons an a iance, so he model is homoscedas ic. Conside ing he pos es ima ion es s, we conclude ha he model’s indings a e obus . 5. Conclusions Insu ance ma ke ac i i y may con ibu e o economic g ow h, playing bo h oles, as a inancial in e media y and a p o ide o isk ans e and indemni ica ion, allowing di e en isks o be managed mo e e icien ly. In his s udy, we ha e been ocused on Albanian insu ance ma ke o explo e he long ela ionship be ween g ow h and he insu ance ma ke . Insu ance is measu ed using h ee di e en indexes such as g oss w i en p emiums, pene a ion and densi y a es. The empi ical indings o ou s udy e ealed ha he e is no long un ela ion be ween economic g ow h and insu ance ma ke when he second one is measu ed by he g oss w i en p emium olume and he pene a ion a e. On he o he hand, when he insu ance ma ke is measu ed by he densi y a e, he model con i med ha he e exis s a long- un nega i e ela ion be ween economic g ow h and li e insu ance densi y, and a posi i e ela ion be ween economic g ow h and non-li e insu ance. The indings a e in line wi h a pa o he s udies ci ed in li e a u e e iew, which e ealed ha he li e insu ance ma ke has a posi i e impac in high income coun ies, bu no in de eloping ones and ha he economic de elopmen is mo e a ec ed by he insu ance ac i i y which domina es he ma ke . As he insu ance ma ke is p e ailed by he non-li e insu ance ma ke , i is expec ed ha he las one d i es he posi i e esul . EJCE, ol. 18, no. 2 (2021) A ailable online a h ps://ejce.liuc.i 284 Due o he low le el o insu ance cul u e and he unde de elopmen o li e-insu ance companies in espec o o he inancial in e media ies such as banks and in es men unds, he Albanian ci izens ha e no in e es in di ec ing hei sa ings and in es men s owa ds he insu ance companies. They s ill di ec hei sa ings owa ds adi ional al e na i es, like bank deposi s. The abo e indings may be o a high impo ance o he go e nmen and he policymake s, because he Albanian inancial legisla ion should aim o s imula e he insu ance ma ke , especially he li e insu ance ac i i y, wi h he same a en ion as he banking sec o . Fu he mo e, he indings o his s udy would help he expe s o add ess some impo an aspec s ha could be conside ed in ope a ing in he ield o insu ance ma ke , and he go e nmen o adop some public measu es o consolida e and s eng hen he insu ance ma ke in Albania. The indings o his s udy may be used in he u u e o analyse he ela ionship be ween economic de elopmen and he insu ance ma ke in he con ex o a egional a ea. Gen iana Sha ku, E is Kumi, Does insu ance ma ke impac he economic g ow h? E idence om Albania A ailable online a h ps://ejce.liuc.i 285 Appendix Annex 1: VECM es ima es Va iables (1) ∆G ow h (2) ∆LID (3) ∆NID ECT -1 -0.623** (0.172) -0.009 (0.007) -0.146** (0.052) ∆G ow h -1 0.357 (0.195) 0.012 (0.008) 0.190* (0.059) ∆G ow h -2 -0.022 (0.200) 0.016 (0.008) 0.139* (0.060) ∆G ow h -3 0.430* (0.185) 0.010 (0.008) 0.235** (0.056) ∆G ow h -4 -0.124 (0.195) 0.016 (0.008) 0.049 (0.059) ∆G ow h -5 -0.001 (0.168) 0.007 (0.007) 0.153** (0.051) ∆G ow h -6 0.310 (0.172) 0.007 (0.007) 0.041 (0.052) ∆LID -1 18.665** (6.114) -0.359 (0.254) -1.776 (1.843) ∆LID -2 0.629 (6.653) -0.283 (0.276) -3.208 (2.006) ∆LID -3 12.889 (6.706) -0.576 (0.278) 0.191 (2.022) ∆LID -4 10.750 (6.558) 0.124 (0.272) -0.612 (1.977) ∆LID -5 7.487 (6.474) -0.188 (0.269) 1.771 (1.952) ∆LID -6 15.327** (5.391) -0.079 (0.224) 1.144 (1.625) ∆NID -1 -1.008 (0.651) -0.028 (0.027) -0.772** (0.196) ∆NID -2 -0.179 (0.690) -0.042 (0.029) -0.707** (0.208) ∆NID -3 -0.940 (0.779) -0.050 (0.032) -0.842** (0.235) ∆NID -4 -0.984 (0.704) -0.040 (0.029) -0.148 (0.212) ∆NID -5 -0.881 (0.591) -0.031 (0.025) -0.360 (0.178) ∆NID -6 -0.928 (0.540) -0.022 (0.022) -0.471** (0.163) C -0.020 (0.669) 0.069** (0.028) 0.774** (0.202) Obse a ions 47 47 47 R-squa ed 0.747 0.742 0.788 ** p<0.01, * p<0.05, S anda d e o s a e shown in pa en hesis EJCE, ol. 18, no. 2 (2021) A ailable online a h ps://ejce.liuc.i 286 Annex 2: VECLM Tes VEC Residual Se ial Co ela ion LM Tes s Null Hypo hesis: no se ial co ela ion a lag o de h Sample: 2005Q12018Q2 Included obse a ions: 47 Lags LM-S a P ob 1 10.46747 0.3140 2 6.285575 0.7110 3 8.478594 0.4867 4 10.11757 0.3411 5 9.923588 0.3567 6 6.705728 0.6677 7 7.158196 0.6207 P obs om chi-squa e wi h 9 d . Annex 3: No mali y Tes VEC Residual No mali y Tes s O hogonaliza ion: Cholesky (Lu kepohl) Null Hypo hesis: esiduals a e mul i a ia e no mal Sample: 2005Q12018Q2 Included obse a ions: 47 Componen Skewness Chi-sq d P ob. 1 -0.695319 3.787166 1 0.0516 2 0.319298 0.798616 1 0.3715 3 0.238627 0.446051 1 0.5042 Join 5.031832 3 0.1695 Componen Ku osis Chi-sq d P ob. 1 3.769842 1.160620 1 0.2813 2 3.342544 0.229784 1 0.6317 3 3.349819 0.239647 1 0.6245 Join 1.630051 3 0.6526 Componen Ja que-Be a d P ob. 1 4.947786 2 0.0843 2 1.028400 2 0.5980 3 0.685698 2 0.7097 Join 6.661884 6 0.3533 Gen iana Sha ku, E is Kumi, Does insu ance ma ke impac he economic g ow h? E idence om Albania A ailable online a h ps://ejce.liuc.i 287 Annex 4: He e oscedas ici y es VEC Residual He e oskedas ici y Tes s: No C oss Te ms (only le els and squa es) Da e: 01/06/19 Time: 17:00 Sample: 2005Q12018Q2 Included obse a ions: 47 Join es : Chi-sq d P ob. 238.9187 228 0.2965 Indi idual componen s: Dependen R-squa ed F(38,8) P ob. Chi-sq(38) P ob. es1* es1 0.789794 0.790998 0.7093 37.12032 0.5100 es2* es2 0.820049 0.959381 0.5774 38.54229 0.4450 es3* es3 0.812650 0.913178 0.6122 38.19453 0.4606 es2* es1 0.810599 0.901011 0.6215 38.09815 0.4650 es3* es1 0.826011 0.999475 0.5484 38.82254 0.4325 es3* es2 0.892311 1.744412 0.2069 41.93859 0.3040 EJCE, ol. 18, no. 2 (2021) A ailable online a h ps://ejce.liuc.i 288 Re e ences Adams M. e al. (2009), ‘Comme cial Banking, Insu ance and Economic G ow h in Sweden be ween 1830 and 1998’, Jou nal o Accoun ing, Business & Financial His o y, 19(1), 21-38. Akinlo T., Apanisile O.T. 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