MACROECONOMIC ENVIRONMENT EFFECTS ON DEMAND FOR INSURANCE IN SAUDI ARABIA: AN EMPIRICAL ANALYSIS
Journal: International Journal of Management (IJM) (Vol.11, No. 8)Publication Date: 2020-08-31
Authors : Jumah Ahmad Alzyadat;
Page : 148-162
Keywords : Macroeconomic Environment; Insurance Demand; Insurance Density; VAR (Vector Autoregression); Vector Error Correction Model (VECM).;
Abstract
The study aimed to measure and analyze the most important macroeconomic factors determining the demand for insurance in Saudi Arabia. The study used VAR (Vector Autoregression), Impulse Response Function, Granger Causality test, and Variance Decomposition. The results showed that demand for insurance in KSA responds to changes in macroeconomic variables in the long run and short run, Granger Causality test results indicate a unidirectional causal relationship between (GDP, per capita income, and government expenditures on social security) and the demand for insurance in KSA. The results showed that there is a bidirectional causal relationship between financial development and the demand for insurance. Moreover, there is no causal relationship between inflation and the demand for insurance. GDP as an indicator of economic activities has a positive and strong impact on the demand for insurance in KSA. Per capita income as a measure of income, money supply, and government expenditures on social security, all these variables had a positive effect on the demand for insurance. And there is no evidence that inflation rate has a significant effect on demand for insurance in long run.
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