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Remittances and banking sector breadth and depth: Evidence from Mexico

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  • Demirgüç-Kunt, Asli
  • Córdova, Ernesto López
  • Pería, María Soledad Martínez
  • Woodruff, Christopher

Abstract

Despite the importance of remittances to developing countries, their impact on banking sector breadth and depth in recipient countries has been largely unexplored. We examine this topic using municipality-level data on the fraction of households receiving remittances and on measures of banking breadth and depth for Mexico. We find that remittances are strongly associated with greater banking breadth and depth, increasing the number of branches and accounts per capita and the amount of deposits to GDP. These effects are significant both statistically and economically, and are robust to the potential endogeneity of remittances, inclusion of a wide range of controls and even municipal fixed effects specifications using an alternative panel data set from a sample of municipalities.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 95 (2011)
Issue (Month): 2 (July)
Pages: 229-241

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Handle: RePEc:eee:deveco:v:95:y:2011:i:2:p:229-241

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Web page: http://www.elsevier.com/locate/devec

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Keywords: Remittances Financial development Banking sector depth and breadth;

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References

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  1. Aggarwal, Reena & Demirguc-Kunt, Asli & Martinez Peria, Maria Soledad, 2006. "Do workers'remittances promote financial development ?," Policy Research Working Paper Series 3957, The World Bank.
  2. Frank Kleibergen & Richard Paap, 2003. "Generalized Reduced Rank Tests using the Singular Value Decomposition," Tinbergen Institute Discussion Papers 03-003/4, Tinbergen Institute.
  3. José Ernesto López-Córdova, 2006. "Globalization, migration and development : the role of Mexican migrant remittances," INTAL Working Papers 1440, Inter-American Development Bank, INTAL.
  4. Woodruff, Christopher & Zenteno, Rene, 2007. "Migration networks and microenterprises in Mexico," Journal of Development Economics, Elsevier, vol. 82(2), pages 509-528, March.
  5. Hildebrandt, Nicole & McKenzie, David, 2005. "The effects of migration on child health in Mexico," Policy Research Working Paper Series 3573, The World Bank.
  6. Robin Burgess & Rohini Pande, 2005. "Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment," American Economic Review, American Economic Association, vol. 95(3), pages 780-795, June.
  7. Shawn Kanaiaupuni & Katharine Donato, 1999. "Migradollars and mortality: The effects of migration on infant survival in Mexico," Demography, Springer, vol. 36(3), pages 339-353, August.
  8. Giuliano, Paola & Ruiz-Arranz, Marta, 2009. "Remittances, financial development, and growth," Journal of Development Economics, Elsevier, vol. 90(1), pages 144-152, September.
  9. Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (S (ed.), Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084 Central Bank of Chile.
  10. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
  11. Mckenzie, David & Rapoport, Hillel, 2007. "Network effects and the dynamics of migration and inequality: Theory and evidence from Mexico," Journal of Development Economics, Elsevier, vol. 84(1), pages 1-24, September.
  12. Catalina Amuedo-Dorantes & Tania Sainz & Susan Pozo, 2007. "Remittances and healthcare expenditure patterns of populations in origin communities : evidence from Mexico," INTAL Working Papers 1450, Inter-American Development Bank, INTAL.
  13. Gordon H. Hanson, 2007. "Emigration, remittances and labor force participation in Mexico," INTAL Working Papers 1456, Inter-American Development Bank, INTAL.
  14. Beck, Thorsten & Levine, Ross & Loayza, Norman, 2000. "Finance and the sources of growth," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 261-300.
  15. Ross Levine, 2004. "Finance and Growth: Theory and Evidence," NBER Working Papers 10766, National Bureau of Economic Research, Inc.
  16. Thorsten Beck & Asli Demirgüç-Kunt & Ross Levine, 2007. "Finance, inequality and the poor," Journal of Economic Growth, Springer, vol. 12(1), pages 27-49, March.
  17. Kaivan Munshi, 2003. "Networks In The Modern Economy: Mexican Migrants In The U.S. Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 118(2), pages 549-599, May.
  18. José Ernesto López-Córdova & Alexandra Olmedo, 2006. "International remittances and development : existing evidence, policies and recommendations," INTAL Working Papers 1290, Inter-American Development Bank, INTAL.
  19. Gilbert,Christopher L. & Vines,David (ed.), 2006. "The World Bank," Cambridge Books, Cambridge University Press, number 9780521029018.
  20. Christopher Woodruff, 2007. "Mexican microenterprise investment and employment : the role of remittances," INTAL Working Papers 1452, Inter-American Development Bank, INTAL.
  21. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
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Citations

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Cited by:
  1. Anzoategui, Diego & Demirguc-Kunt, Asli & Peria, Maria Soledad Martinez, 2011. "Remittances and financial inclusion : evidence from El Salvador," Policy Research Working Paper Series 5839, The World Bank.
  2. Ambrosius, Christian, 2012. "Are remittances a substitute for credit? Carrying the financial burden of health shocks in national and transnational households," Discussion Papers 2012/9, Free University Berlin, School of Business & Economics.
  3. Carlo Alcaraz & Daniel Chiquiar & Alejandrina Salcedo, 2010. "Remittances, Schooling, and Child Labor in Mexico," Working Papers 2010-14, Banco de México.
  4. Aggarwal, Reena & Demirgüç-Kunt, Asli & Pería, Maria Soledad Martínez, 2011. "Do remittances promote financial development?," Journal of Development Economics, Elsevier, vol. 96(2), pages 255-264, November.
  5. Anneke Kosse & Robert Vermeulen, 2013. "Migrants' Choice of Remittance Channel: Do General Payment Habits Play a Role?," DNB Working Papers 375, Netherlands Central Bank, Research Department.
  6. Richard P C Brown & Fabrizio Carmignani & Ghada Fayad, 2011. "Migrants' Remittances and financial Development: Macro- and Micro-level Evidence of a Perverse Relationship," OxCarre Working Papers 059, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  7. Ambrosius, Christian, 2011. "Are Remittances a 'Catalyst' for Financial Access? Evidence from Mexico," Proceedings of the German Development Economics Conference, Berlin 2011 5, Verein für Socialpolitik, Research Committee Development Economics.

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