An empirical study of relationships between islamic insurances and economic growth

This study aims to examine simultaneous relationships between Islamic insurance demand and economic growth in Indonesia during the period of 2002-2015. This study will also evaluate statistical models by incorporating other variables such as gross premium income, gross domestic product, the percentage of poverty, dependancy ratio and rate of inflation. The relationships among those variables were analyzed using the simultaneous equation model whereas the parameters have been estimated using the two stage least squares technique. The result shows that forthe economic growth model, there are only two variables i.e gross domestic product and dependency ratio which contribute significantly to the economic growth. On the other hand, the inflation variable does not affect the growth since the p-values are equal to 0,66. Moreover, the variables affecting the Islamic insurance demand are the economic growth, inflation rate and dependancy ratio with p-values equal to 0,01, 0,09 and 0,03 respectively. The simultaneous model gives the result that significant Islamic insurance demand affects the economic growth at α = 10%, but economic growth does not affect Islamic insurance premium income.