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Remittances and Growth in Latin America: A Panel Unit Root and Panel Cointegration Analysis

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Author Info
Miguel D. Ramirez ()
Hari Sharma

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Abstract

Using recently developed panel unit root and panel cointegration tests and the Fully-Modified OLS (FMOLS) methodology, this paper estimates the impact of remittances on the economic growth of selected upper and lower income Latin American & Caribbean countries. Despite a large flow of remittances to the region, there have been relatively few empirical studies assessing the impact of remittances on growth in Latin American and the Caribbean. Panel unit root tests suggests that several of the macro variables included in the model exhibit unit roots, yet, at the same time, Pedroni’s panel cointegration methodology determined that there is a cointegrating relationship among the variables in the estimated model. Moreover, FMOLS estimates suggest that remittances have a positive and significant effect on economic growth in both groups of countries. The interaction of remittances with a financial development variable revealed that these two variables act as substitutes and, moreover, that the impact of remittances is more pronounced in the presence of the financial development variable.

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Article provided by Euro-American Association of Economic Development in its journal Estudios Economicos de Desarrollo Internacional.

Volume (Year): 9 (2009)
Issue (Month): 1 ()
Pages:
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Handle: RePEc:eaa:eedein:v:9:y2009:i:9_1

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Acosta, Pablo & Calderon, Cesar & Fajnzylber, Pablo & Lopez, Humberto, 2007. "What is the impact of international remittances on poverty and inequality in Latin America ?," Policy Research Working Paper Series 4249, The World Bank. [Downloadable!]
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  2. Kaddour Hadri, 1999. "Testing For Stationarity In Heterogeneous Panel Data," Research Papers 1999_04, University of Liverpool Management School.
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  3. Pablo Acosta & Cesar Calderón & Pablo Fajnzylber & Humberto López, 2006. "Remittances and Development in Latin America," The World Economy, Blackwell Publishing, vol. 29(7), pages 957-987, 07. [Downloadable!] (restricted)
  4. Poonam Gupta, 2005. "Macroeconomic Determinants of Remittances: Evidence from India," IMF Working Papers 05/224, International Monetary Fund. [Downloadable!]
  5. Rioja, Felix & Valev, Neven, 2004. "Does one size fit all?: a reexamination of the finance and growth relationship," Journal of Development Economics, Elsevier, vol. 74(2), pages 429-447, August. [Downloadable!] (restricted)
  6. Nicholas Glytsos, 2005. "“Dynamic Effects of Migrant Remittances on Growth: An Econometric Model with an Application to Mediterranean Countries”. Discussion Paper, No. 74, KEPE, Athens, 2002," Labor and Demography 0505014, EconWPA. [Downloadable!]
  7. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July. [Downloadable!] (restricted)
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  8. Jesus Canas & Roberto Coronado & Pia Orrenius, 2007. "Explaining the increase in remittances to Mexico," The Southwest Economy, Federal Reserve Bank of Dallas, issue Jul, pages 3-7. [Downloadable!]
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  1. Ziesemer, Thomas, 2009. "The Impact of the Credit Crisis on Poor Developing Countries: Growth, worker remittances, accumulation and migration," UNU-MERIT Working Paper Series 026, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology. [Downloadable!]
  2. Ziesemer, Thomas, 2008. "Worker remittances, migration, accumulation and growth in poor developing countries," UNU-MERIT Working Paper Series 063, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology. [Downloadable!]
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