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Insurance - Economic Growth Nexus: Evidence from Botswana

Author

Listed:
  • Basetsana Oitsile
  • Obonye Galebotswe
  • Lesego Sekwati

Abstract

The paper investigates the influence of insurance penetration on economic growth in Botswana for the period 1994-2013. Using the autoregressive distributed lag (ARDL) bounds test approach to Cointegration by Pesaran et al. (2001) the study finds a negative long-run relationship between insurance penetration and economic growth. This suggests that the recent rapid expansion of the insurance sector could be hurting the economy’s long-run growth. We contend that this finding could reflect a saving-substitution effect in which insurance assets mobilized locally are invested abroad. However, the effect is economically small and statistically significant only at the 10 percent level. Furthermore, there is no evidence that insurance penetration affects growth in the short-run. Nonetheless we argue that there is a need to pay more attention to the insurance sector in financial sector policy analysis, lest it becomes a significant leakage of funds from the income-expenditure stream.

Suggested Citation

  • Basetsana Oitsile & Obonye Galebotswe & Lesego Sekwati, 2018. "Insurance - Economic Growth Nexus: Evidence from Botswana," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 8(6), pages 843-852.
    • Handle: RePEc:asi:aeafrj:v:8:y:2018:i:6:p:843-852:id:1716
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    Cited by:

    1. Ahmad Almashaqbeh & Hasnah Shaari & Hijattulah Abdul-Jabbar, 2019. "The Effect of Board Diversity on Real Earnings Management: Empirical Evidence From Jordan," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(5), pages 495-508, August.
    2. Sharifah Nazatul Faiza Syed Mustapha Nazri & Mohd Ikram Abdul Rasib & Salwa Zolkifli, 2019. "The Influence of Competency, Usage of It and Career Expectation on Internal Auditor¡¯s Effectiveness in Ggovernment Linked Companies (GLCs)," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 10(3), pages 337-352, May.
    3. Mohamad Helmi bin Hidthiir & Muhammad Farhan Basheer & Saira Ghulam Hassan, 2019. "The Simultaneity of Corporate Financial Decisions Under Different Levels of Managerial Ownership: A Case of Pakistani Listed Firms," Research in World Economy, Research in World Economy, Sciedu Press, vol. 10(2), pages 147-159, July.

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