Insurance-growth nexus in Ghana: An autoregressive distributed lag bounds cointegration approach

Abstract

This paper examines the long-run causal relationship between insurance penetration and economic growth in Ghana from 1990 to 2010. Using the autoregressive distributed lag (ARDL) bounds approach to cointegration by Pesaran et al., 1996, Pesaran et al., 2001, the study finds a long-run positive relationship between insurance penetration and economic growth which implies that funds mobilized from insurance business have a long run impact on economic growth. A unidirectional causality was found to run from aggregate insurance penetration, life and non-life insurance penetration to economic growth to support the ‘supply-leading’ hypothesis. The findings have implications for insurance market development in Ghana.