IDEAS home Printed from https://ideas.repec.org/a/spr/futbus/v7y2021i1d10.1186_s43093-021-00053-0.html
   My bibliography  Save this article

Migrant’s remittance and investment financing nexus in Africa: Does investment climate matter?

Author

Listed:
  • Chinenye Ifeoma Nwokolo

    (University of Lagos)

  • Matthew Ikechukwu Ogbuagu

    (Federal University Oye-Ekiti)

  • Wakeel Atanda Isola

    (University of Lagos)

Abstract

Development economists have enjoined Africans to leverage on remittance as their main source of investment financing due to its constant and undisrupted inflows despite structural distortions and economic weaknesses compared to other sources of financial flows in recent time. This ignited the motivation for this study, to unveil the nexus between migrant’s remittance and investment financing and the modulating effect of the investment climate in this relation on a panel of 28 sub-Saharan African countries over the period 1995 to 2017. Using the panel autoregression distributive lagged estimation technique, the following empirical findings were established. First, the theoretical supposition underpinning the assumption in investment climate as a factor that motivates migrant’s remittance inflow to be channelled to investment received a clear empirical support. Second, it was established that the interaction between remittance and components of investment climate (government size and open market) enhanced the growth of private investment. Last, remittance is found to exert a positive effect on private investment in as much as the former does not exceed the threshold of 78%, above which private investment would decline off the quadratic curve. The study suggests the policy-makers channel deliberate efforts at improving not only the efficiency of the market, but government participation especially in the area of tax policy and fiscal financing.

Suggested Citation

  • Chinenye Ifeoma Nwokolo & Matthew Ikechukwu Ogbuagu & Wakeel Atanda Isola, 2021. "Migrant’s remittance and investment financing nexus in Africa: Does investment climate matter?," Future Business Journal, Springer, vol. 7(1), pages 1-11, December.
    • Handle: RePEc:spr:futbus:v:7:y:2021:i:1:d:10.1186_s43093-021-00053-0
    DOI: 10.1186/s43093-021-00053-0
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1186/s43093-021-00053-0
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1186/s43093-021-00053-0?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. B. W. Adeoye & Chinenye Ifeoma Nwokolo & Nnenna Ifunanyachukwu Igboanugo, 2020. "Migrant Remittance Inflow and Industrialization in Africa: What Role Does Financial Development Play?," Advances in African Economic, Social and Political Development, in: Diery Seck (ed.), Financing Africa’s Development, pages 191-220, Springer.
    2. Dilip Ratha & Sanket Mohapatra & Zhimei Xu, 2008. "Outlook for Remittance Flows 2008-2010 : Growth Expected to Moderate Significantly, But Flows to Remain Resilient," World Bank Publications - Reports 11008, The World Bank Group.
    3. Dean Yang, 2008. "International Migration, Remittances and Household Investment: Evidence from Philippine Migrants’ Exchange Rate Shocks," Economic Journal, Royal Economic Society, vol. 118(528), pages 591-630, April.
    4. Stark, Oded & Bloom, David E, 1985. "The New Economics of Labor Migration," American Economic Review, American Economic Association, vol. 75(2), pages 173-178, May.
    5. James Atta Peprah & Isaac Kwesi Ofori & Abel Nyarko Asomani, 2019. "Financial development, remittances and economic growth: A threshold analysis," Cogent Economics & Finance, Taylor & Francis Journals, vol. 7(1), pages 1625107-162, January.
    6. Efobi, Uchenna & Asongu, Simplice & Okafor, Chinelo & Tchamyou, Vanessa & Tanankem, Belmondo, 2016. "Diaspora Remittance Inflow, Financial Development and the Industrialisation of Africa," MPRA Paper 76121, University Library of Munich, Germany.
    7. Bjuggren, Per-Olof & Dzansi, James & Shukur, Ghazi, 2010. "Remittances and Investment," Working Paper Series in Economics and Institutions of Innovation 216, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    8. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    9. David E. Bloom & Richard B. Freeman, 1986. "Population Growth, Labor Supply, and Employment in Developing Countries," NBER Working Papers 1837, National Bureau of Economic Research, Inc.
    10. Kazeem Bello AJIDE & P.B. EREGHA, 2014. "Economic Freedom And Foreign Direct Investment In Ecowas Countries: A Panel Data Analysis," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 14(2).
    11. World Bank, 2009. "The World Bank Annual Report 2009," World Bank Publications - Books, The World Bank Group, number 4354, December.
    12. Annie L. Hines & Nicole B. Simpson, 2019. "Migration, remittances and human capital investment in Kenya," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 48(3), November.
    13. World Bank, 2009. "The World Bank Annual Report 2009," World Bank Publications - Books, The World Bank Group, number 4356, December.
    14. Sobiech, Izabela, 2019. "Remittances, finance and growth: Does financial development foster the impact of remittances on economic growth?," World Development, Elsevier, vol. 113(C), pages 44-59.
    15. 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.
    16. James Dzansi, 2013. "Do remittance inflows promote manufacturing growth?," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 51(1), pages 89-111, August.
    17. Ndikumana, Leonce, 2000. "Financial Determinants of Domestic Investment in Sub-Saharan Africa: Evidence from Panel Data," World Development, Elsevier, vol. 28(2), pages 381-400, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Simplice Asongu & Nicholas Biekpe & Vanessa Tchamyou, 2019. "Remittances, ICT and doing business in Sub-Saharan Africa," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 46(1), pages 35-54, January.
    2. Gloria Clarissa O. Dzeha, 2016. "The decipher, theory or empirics: a review of remittance studies," African Journal of Accounting, Auditing and Finance, Inderscience Enterprises Ltd, vol. 5(2), pages 113-134.
    3. Efobi, Uchenna & Asongu, Simplice & Okafor, Chinelo & Tchamyou, Vanessa & Tanankem, Belmondo, 2016. "Diaspora Remittance Inflow, Financial Development and the Industrialisation of Africa," MPRA Paper 76121, University Library of Munich, Germany.
    4. Simplice A. Asongu & Nicholas M. Odhiambo, 2020. "Remittances, the diffusion of information and industrialisation in Africa," Contemporary Social Science, Taylor & Francis Journals, vol. 15(1), pages 98-117, January.
    5. Efobi, Uchenna & Asongu, Simplice & Okafor, Chinelo & Tchamyou, Vanessa & Tanankem, Belmondo, 2019. "Remittances, finance and industrialisation in Africa," Journal of Multinational Financial Management, Elsevier, vol. 49(C), pages 54-66.
    6. A. Nurul Hossain & Syed Hasanuzzaman, 2013. "Remittances and investment nexus in Bangladesh: an ARDL bounds testing approach," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 60(4), pages 387-407, December.
    7. -, 2020. "Diseño de estrategias orientadas a promover la inversión de remesas familiares en cadenas de valor: guía metodológica," Sede Subregional de la CEPAL en México (Estudios e Investigaciones) 45719, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    8. Jamiu Adetola Odugbesan & Tomiwa Adebayo Sunday & Gbolahan Olowu, 2021. "Asymmetric effect of financial development and remittance on economic growth in MINT economies: an application of panel NARDL," Future Business Journal, Springer, vol. 7(1), pages 1-9, December.
    9. Anupam Das & Murshed Chowdhury, 2019. "Macroeconomic impacts of remittances in Bangladesh: The role of reverse flows," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 48(3), November.
    10. Ait Benhamou, Zouhair & Cassin, Lesly, 2021. "The impact of remittances on savings, capital and economic growth in small emerging countries," Economic Modelling, Elsevier, vol. 94(C), pages 789-803.
    11. Chengjuan Xia & Md. Qamruzzaman & Anass Hamadelneel Adow, 2022. "An Asymmetric Nexus: Remittance-Led Human Capital Development in the Top 10 Remittance-Receiving Countries: Are FDI and Gross Capital Formation Critical for a Road to Sustainability?," Sustainability, MDPI, vol. 14(6), pages 1-24, March.
    12. Sonal Devesh & Abdullah M. Asrul Affendi, 2021. "Modelling the Impact of Oil Price on Food Imports: Case of Oman," International Journal of Energy Economics and Policy, Econjournals, vol. 11(4), pages 113-120.
    13. Schneider, Friedrich & Khan, Shabeer & Baharom Abdul Hamid & Khan, Abidullah, 2019. "Does the tax undermine the effect of remittances on shadow economy?," Economics Discussion Papers 2019-67, Kiel Institute for the World Economy (IfW Kiel).
    14. Stephen Asafo Agyei, 2021. "The Dynamics of Remittances Impact: A Mixed-Method Approach to Understand Ghana’s Situation and the Way Forward," Social Sciences, MDPI, vol. 10(11), pages 1-21, October.
    15. James Temitope Dada & Taiwo Akinlo, 2023. "Remittances-Finance-Growth Trilogy: Do Remittance And Financial Development Complement Or Substitute Each Other To Affect Growth In Nigeria?," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 68(236), pages 105-138, January –.
    16. Kabinet Kaba & Mahamat Moustapha, 2021. "Remittances and firm performance in sub-Saharan Africa: evidence from firm-level data," Working Papers DT/2021/07, DIAL (Développement, Institutions et Mondialisation).
    17. Tan, Madeleine Sui-Lay, 2016. "Policy coordination among the ASEAN-5: A global VAR analysis," Journal of Asian Economics, Elsevier, vol. 44(C), pages 20-40.
    18. Ali Burak Güven, 2012. "The IMF, the World Bank, and the Global Economic Crisis: Exploring Paradigm Continuity," Development and Change, International Institute of Social Studies, vol. 43(4), pages 869-898, July.
    19. Tiwari, Smriti, 2021. "Do macroeconomic fluctuations at destination matter in determining migrants’ return decisions?," World Development, Elsevier, vol. 148(C).
    20. Muyambiri Brian & Odhiambo Nicholas, 2017. "Financial Development, Savings and Investment in South Africa: A Dynamic Causality Test," Global Economy Journal, De Gruyter, vol. 17(3), pages 1-10, September.

    More about this item

    Keywords

    Remittance; Investment financing; Investment climate; Panel data analysis; Sub-Saharan region;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:futbus:v:7:y:2021:i:1:d:10.1186_s43093-021-00053-0. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.