The relationship between insurance development and economic growth in the Philippines using vector autoregression and vector error correction models

• Main Authors: Paloma, Jhanniz Pauline C., Salvador, Allyssa Marie M.
• Format: text
• Language: English
• Published: Animo Repository 2016
• Subjects: Insurance > Philippines; Economic development > Philippines; Cointegration > Philippines; Vector fields; Vector analysis; Statistics and Probability
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/14904
• Institution: De La Salle University

For years, researchers have been interested in what kind of relationship can be found between insurance development and economic growth. The Philippines has been part of a few studies that used panel data analysis or cross country analysis. However, there has been no known study that mainly focuses on the Philippines alone. Thus, it is found necessary to examine the relationship of insurance development and economic growth for the Philippine setting. This study identified the long run and short run relationship between economic growth and insurance development in the Philippines over the period 1996-2014. Factor analysis was used to identify one factor for economic growth and two factors for insurance development. According to the results of Johansen's Co-integration Test, there is a long run relationship among the three factors. Since there is a co-integrating relationship, the vector error correction model was adopted. The results revealed that there is a long run causality running from Eco11 and Ins22 to Ins13. It also suggested that there is a short run causality running from Eco11 to Ins13, and from Ins22 to Ins13. The findings suggest that the economic growth affects insurance development both in the long run and short run.