Life Insurance and Euro Zone's Economic Growth

This paper investigates the impacts of financial institutions on economic growth based on a panel data for twelve Euro countries. Two results are obtained. First, cross-country evidences reveal that life insurance penetration and banking development do not have any impact on real outputs. We argue that the findings are strongly influenced by multicollinearity among variables of interest. Second, to avoid misguided conclusions and power distortion caused by cross-sectional analysis, fixed effect model supports that life insurance and banking activity are important predictor of economic development in Euro zone.