Insurance Market Development, Financial Service Export and Economic Growth: Evidence from East African Countries
Purpose: This article examines the long-run causal relationship between both insurance development and insurance and financial service export, and economic growth in 8 East African countries over the period of 2000-2018. Design/Approach/Methodology: Using the panel auto-regressive distributed lag (ARDL) and fixed effect (FE) estimation techniques, it finds a robust evidence for this relationship. Furthermore, this article tests and finds the complementarity relationship between both insurance and banking sector development, and insurance and human capital investment, especially for economies having well developed financial sector in relative terms. Findings: The research evidence raises questions regarding the impact that both, the faster growth of insurance activity and financial service export would have a positive effect on economic growth. Practical Implications: Insurance contributes to the economic growth in terms of promoting financial stability and reducing anxiety, substituting government security programs, facilitating trade and commerce, mobilizing savings, enabling efficient risk management, mitigating losses, fostering a more efficient capital allocation. Besides, insurance and financial service export, though buried in domestic real exports, is becoming a relevant issue of concern in the empirical research as to its contribution towards economic growth. Originality/Value: There is no such a detailed study in the field in the region under study. The conclusions are different for countries with a stock exchange and without a stock exchange market.