ETHIOPIAN INSURANCE SECTOR DEVELOPMENT AND ITS CONTRIBUTION TO ECONOMIC GROWTH

Abstract

The study examines the contribution of Ethiopian Insurance industry to the economic growth. It analyses both the long run and short run dynamics among important determinants of variables over the period 34 years (1984-2019). Using unit root tests and Johansen Co integration tests are applied to investigate relationship among the variables respecting. Error correction model has been used to analysis the long run and short run movements of variables. A pair wise granger causality test has also used to examine the causal relationship among the variables in the model. The regression result indicated that insurance premium positive and insurance claim negative has significant and relationship with economic growth. However insurance profit has positive significant and insurance investment has negative but insignificant relation with economic growth. The result of granger causality test indicates that there is unidirectional relationship from economic growth to insurance premium, insurance claim and insurance profit. However insurance investment has no causal relation with any variable in short run. The implication of this finding is that there is a causal relationship between insurance performance and economic growth. The study concludes that the economic growth has positive impacts on the growth of insurance development.