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.