IDEAS home Printed from https://ideas.repec.org/p/abh/wpaper/20-081.html
   My bibliography  Save this paper

Remittances and Financial Development in Africa

Author

Listed:
  • Ibrahim A. Adekunle

    (EXCAS, Liège, Belgium)

  • Sheriffdeen A. Tella

    (Olabisi Onabanjo University, Ago-Iwoye, Nigeria)

  • Kolawole Subair

    (Yobe State University, Damaturu, Nigeria)

  • Soliu B. Adegboyega

    (Olabisi Onabanjo University, Ago-Iwoye, Nigeria)

Abstract

Despite the magnitude of remittances as an alternative source of investment financing in Africa, the financial sector in Africa has significantly remained underdeveloped and unstable. Finding a solution to Africa's financial deregulation problems has proved tenacious partly because of inadequate literature that explain the nature of Africa capital and financial markets which has shown to be unorganised, spatially fragmented, highly segmented and invariably externally dependent. We examine the structural linkages between remittances and financial sector development in Africa. Panel data on indices of remittances was regressed on indices of financial sector development in fifty-three (53) African countries from 1986 through 2017 using the Pooled Mean Group (PMG) estimation procedure. We accounted for cross-sectional dependence inherent in ordinary panel estimation and found a basis for the strict orthogonal relationship among the variables. Findings revealed a positive long-run relationship between remittances and financial development with a significant (positive) short-run relationship. It is suggested that, while attracting migrants' transfers which can have significant short-run poverty-alleviating advantages, in the long run, it might be more beneficial for African governments to foster financial sector development using alternative financial development strategies.

Suggested Citation

  • Ibrahim A. Adekunle & Sheriffdeen A. Tella & Kolawole Subair & Soliu B. Adegboyega, 2020. "Remittances and Financial Development in Africa," Research Africa Network Working Papers 20/081, Research Africa Network (RAN).
    • Handle: RePEc:abh:wpaper:20/081
    as

    Download full text from publisher

    File URL: http://publications.resanet.org/RePEc/abh/abh-wpaper/Remittances-and-Financial-Development-in-Africa.pdf
    File Function: Revised version, 2020
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Maria Cristina Zhunio & Sharmila Vishwasrao & Eric P. Chiang, 2012. "The influence of remittances on education and health outcomes: a cross country study," Applied Economics, Taylor & Francis Journals, vol. 44(35), pages 4605-4616, December.
    2. I-Ling Shen & Frédéric Docquier & Hillel Rapoport, 2010. "Remittances and inequality: a dynamic migration model," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 8(2), pages 197-220, June.
    3. Richard C. Jones, 1998. "Remittances and Inequality: A Question of Migration Stage and Geographic Scale," Economic Geography, Taylor & Francis Journals, vol. 74(1), pages 8-25, January.
    4. Howell, Anthony, 2017. "Impacts of Migration and Remittances on Ethnic Income Inequality in Rural China," World Development, Elsevier, vol. 94(C), pages 200-211.
    5. Guillermo A. Calvo, 1998. "CAPITAL FLOWS AND CAPITAL-MARKET CRISES: The Simple Economics of Sudden Stops," Journal of Applied Economics, Taylor & Francis Journals, vol. 1(1), pages 35-54, November.
    6. Tomislav Galović & Heri Bezić & Petar Mišević, 2018. "Terrorist Activities and Capital Flows of Developed Countries," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 68(3), pages 337-352, September.
    7. Iwata, Hiroki & Okada, Keisuke & Samreth, Sovannroeun, 2011. "A note on the environmental Kuznets curve for CO2: A pooled mean group approach," Applied Energy, Elsevier, vol. 88(5), pages 1986-1996, May.
    8. Kevin Williams, 2016. "Remittances and Financial Development: Evidence from Sub-Saharan Africa," African Development Review, African Development Bank, vol. 28(3), pages 357-367, September.
    9. Gupta, Sanjeev & Pattillo, Catherine A. & Wagh, Smita, 2009. "Effect of Remittances on Poverty and Financial Development in Sub-Saharan Africa," World Development, Elsevier, vol. 37(1), pages 104-115, January.
    10. Vito Tanzi, 2008. "The role of the state and public finance in the next generation," OECD Journal on Budgeting, OECD Publishing, vol. 8(2), pages 1-27.
    11. De Gregorio, Jose & Guidotti, Pablo E., 1995. "Financial development and economic growth," World Development, Elsevier, vol. 23(3), pages 433-448, March.
    12. Alejandro de la Fuente, 2008. "Remittances and Vulnerability to Poverty in Rural Mexico," WIDER Working Paper Series RP2008-17, World Institute for Development Economic Research (UNU-WIDER).
    13. Stark, Oded & Taylor, J Edward & Yitzhaki, Shlomo, 1986. "Remittances and Inequality," Economic Journal, Royal Economic Society, vol. 96(383), pages 722-740, September.
    14. Chowdhury, Mamta B., 2011. "Remittances flow and financial development in Bangladesh," Economic Modelling, Elsevier, vol. 28(6), pages 2600-2608.
    15. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    16. Dustmann, Christian & Glitz, Albrecht, 2011. "Migration and Education," Handbook of the Economics of Education, in: Erik Hanushek & Stephen Machin & Ludger Woessmann (ed.), Handbook of the Economics of Education, edition 1, volume 4, chapter 0, pages 327-439, Elsevier.
    17. Kenneth A. Tah, 2019. "Remittances and financial access: Evidence from Sub-Saharan Africa," Cogent Economics & Finance, Taylor & Francis Journals, vol. 7(1), pages 1570581-157, January.
    18. Easterly, William, 1999. "The ghost of financing gap: testing the growth model used in the international financial institutions," Journal of Development Economics, Elsevier, vol. 60(2), pages 423-438, December.
    19. Ibrahim A. Adekunle & Tolulope O. Williams & Olatunde J. Omokanmi & Serifat O. Onayemi, 2020. "Mediating roles of institutions in the remittance-growth relationship: evidence from Nigeria," Research Africa Network Working Papers 20/063, Research Africa Network (RAN).
    20. Unknown, 2016. "Energy for Sustainable Development," Conference Proceedings 253270, Guru Arjan Dev Institute of Development Studies (IDSAsr).
    21. de la Fuente, Alejandro, 2010. "Remittances and Vulnerability to Poverty in Rural Mexico," World Development, Elsevier, vol. 38(6), pages 828-839, June.
    22. Shawn Kanaiaupuni & Katharine Donato, 1999. "Migradollars and mortality: The effects of migration on infant survival in Mexico," Demography, Springer;Population Association of America (PAA), vol. 36(3), pages 339-353, August.
    23. Ibrahim A. Adekunle & Tolulope O. Williams & Olatunde J. Omokanmi & Serifat O. Onayemi, 2020. "Mediating roles of institutions in the remittance-growth relationship: evidence from Nigeria," Working Papers of the African Governance and Development Institute. 20/063, African Governance and Development Institute..
    24. Glauco De Vita & Khine S. Kyaw, 2008. "Determinants of capital flows to developing countries: a structural VAR analysis," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 35(4), pages 304-322, September.
    25. Ibrahim A. Adekunle & Tolulope O. Williams & Olatunde J. Omokanmi & Serifat O. Onayemi, 2020. "Mediating roles of institutions in the remittance-growth relationship: evidence from Nigeria," Working Papers 20/063, European Xtramile Centre of African Studies (EXCAS).
    26. Kwabena Gyimah-Brempong & Elizabeth Asiedu, 2015. "Remittances and investment in education: Evidence from Ghana," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 24(2), pages 173-200, March.
    27. Tanzi, Vito, 2008. "The role of the state and public finance in the next generation," Seminarios y Conferencias 7107, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    28. Cooray, Arusha, 2012. "Migrant remittances, financial sector development and the government ownership of banks: Evidence from a group of non-OECD economies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(4), pages 936-957.
    29. F. Wouterse, 2010. "Remittances, Poverty, Inequality and Welfare: Evidence from the Central Plateau of Burkina Faso," Journal of Development Studies, Taylor & Francis Journals, vol. 46(4), pages 771-789.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Das, Anupam & Brown, Leanora & Mcfarlane, Adian, 2023. "Economic Misery and Remittances in Jamaica," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 48(2), pages 33-52, June.
    2. Imen Mohamed Sghaier, 2021. "Remittances and Economic Growth in MENA Countries: The Role of Financial Development," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 1, pages 43-59, March.

    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. Ibrahim A. Adekunle & Sheriffdeen A. Tella & Kolawole Subair & Soliu B. Adegboyega, 2020. "Remittances and Financial Development in Africa," Working Papers 20/081, European Xtramile Centre of African Studies (EXCAS).
    2. Ibrahim A. Adekunle & Sheriffdeen A. Tella & Kolawole Subair & Soliu B. Adegboyega, 2020. "Remittances and Financial Development in Africa," Working Papers of the African Governance and Development Institute. 20/081, African Governance and Development Institute..
    3. Ibrahim A. Adekunle & Sheriffdeen A. Tella, 2021. "Remittances and the Future of African Economies," Working Papers of the African Governance and Development Institute. 21/053, African Governance and Development Institute..
    4. Ibrahim A. Adekunle & Sheriffdeen A. Tella, 2021. "Remittances and the Future of African Economies," Working Papers 21/053, European Xtramile Centre of African Studies (EXCAS).
    5. Ibrahim A. Adekunle & Sheriffdeen A. Tella, 2021. "Remittances and the Future of African Economies," Research Africa Network Working Papers 21/053, Research Africa Network (RAN).
    6. Jakhongir Kakhkharov & Nicholas Rohde, 2020. "Remittances and financial development in transition economies," Empirical Economics, Springer, vol. 59(2), pages 731-763, August.
    7. Le Thanh Tung, 2018. "The Impact Of Remittances On Domestic Investment In Developing Countries: Fresh Evidence From The Asia-Pacific Region," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 9(2).
    8. Opperman, Pieter & Adjasi, Charles Komla Delali, 2019. "Remittance volatility and financial sector development in sub-Saharan African countries," Journal of Policy Modeling, Elsevier, vol. 41(2), pages 336-351.
    9. Kacou Yves Thierry Kacou & Yacouba Kassouri & Andrew Adewale Alola & Mehmet Altuntaş, 2022. "Examining the sustainable development approach of migrants' remittances and financial development in sub‐Saharan African countries," Sustainable Development, John Wiley & Sons, Ltd., vol. 30(5), pages 804-816, October.
    10. Chhavi Tiwari & Sankalpa Bhattacharjee & Pradeepta Sethi & Debkumar Chakrabarti, 2022. "Internal Migration and Rural Inequalities in India," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 41(4), pages 1673-1698, August.
    11. Hem C. Basnet & Bishwa Koirala & Kamal P. Upadhyaya & Ficawoyi Donou-Adonsou, 2021. "Workers’ remittances and financial development: the case of South Asia," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 68(2), pages 185-207, June.
    12. Shreya Pal, 2023. "Does Remittance and Human Capital Formation Affect Financial Development? A Comparative Analysis Between India and China," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 30(2), pages 387-426, June.
    13. Bang, James T. & Mitra, Aniruddha & Wunnava, Phanindra V., 2016. "Do remittances improve income inequality? An instrumental variable quantile analysis of the Kenyan case," Economic Modelling, Elsevier, vol. 58(C), pages 394-402.
    14. Simplice A. Asongu & Tii N. Nchofoung, 2021. "The terrorism-finance nexus contingent on globalisation and governance dynamics in Africa," Research Africa Network Working Papers 21/016, Research Africa Network (RAN).
    15. Ilham Haouas & Naceur Kheraief & Arusha Cooray & Syed Jawad Hussain Shahzad, 2019. "Time-Varying Casual Nexuses Between Remittances and Financial Development in Some MENA Countries," Working Papers 1294, Economic Research Forum, revised 2019.
    16. Wenwen Sheng & M. C. Sunny Wong, 2017. "Capital Flow Management Policies and Riskiness of External Liability Structures: the Role of Local Financial Markets," Open Economies Review, Springer, vol. 28(3), pages 461-498, July.
    17. Ma, Yechi & Chen, Zhiguo & Shinwari, Riazullah & Khan, Zeeshan, 2021. "Financialization, globalization, and Dutch disease: Is Dutch disease exist for resources rich countries?," Resources Policy, Elsevier, vol. 72(C).
    18. Ibrahim A. Adekunle & Olumuyiwa G. Yinusa & Tolulope O. Williams & Rahmon A. Folami, 2021. "On the Determinant of Financial Development in Africa: Geography, Institutions and Macroeconomic Policy Relevance," Research Africa Network Working Papers 21/054, Research Africa Network (RAN).
    19. Ibrahim A. Adekunle & Toluwani G. Kalejaiye & Ayomide, O. Ogunade & Sina J. Ogede & Caleb O. Soyemi, 2020. "Engendering Macroeconomic Policy for Gender Equality in sub-Saharan Africa," Working Papers 20/095, European Xtramile Centre of African Studies (EXCAS).
    20. Bayar, Yilmaz & Sakar, Emre, 2021. "Impact of Domestic Public Borrowing on Financial Development: Evidence from EU Transition Economies," Asian Journal of Applied Economics, Kasetsart University, Center for Applied Economics Research, vol. 28(1).

    More about this item

    Keywords

    Remittance; Financial Development; Pooled Mean Group; Africa;
    All these keywords.

    JEL classification:

    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:abh:wpaper:20/081. 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: Anutechia Asongu Simplice (email available below). General contact details of provider: http://www.resanet.org .

    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.