Advanced Search
MyIDEAS: Login to save this paper or follow this series

Remittances, Financial Development, and Growth

Contents:

Author Info

  • Marta Ruiz-Arranz
  • Paola Giuliano

Abstract

There has been little systematic empirical study on the relationship between remittances and growth. This paper attempts to examine this relationship. Using a newly constructed crosscountry of data series for remittances covering a large sample of developing countries, we relate the interaction between remittances and financial development and its impact on growth. We analyze how a country''s capacity to use remittances and its effectiveness in doing so might be influenced by local financial sector conditions. Given the difficulty of borrowing in developing countries, we explore the hypothesis that remittances can substitute for a lack of financial development and hence promote growth. The empirical analysis shows that remittances can promote growth in less financially developed countries. This relationship controls for the endogeneity of remittances and financial development using a Generalized Method of Moments (GMM) approach, does not depend on the particular measure of financial sector development used, and is robust to a number of sensitivity tests.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=18607
Download Restriction: no

Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/234.

as in new window
Length: 39
Date of creation: 01 Dec 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/234

Contact details of provider:
Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
Email:
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC

Order Information:
Web: http://www.imf.org/external/pubs/pubs/ord_info.htm

Related research

Keywords: Investment; Workers remittances; Financial systems; Economic growth; remittances; impact of remittances; migration; remittance; statistics; impact of remittances on growth; correlations; correlation; effect of remittances; equation; remittance flows; standard errors; migrant; effects of remittances; capital flows; confidence interval; autocorrelation; outliers; role of remittances; workers ? remittances; financial statistics; bootstrap; recipients of remittances; impact of remittances on investment; time series; effect of remittances on growth; send remittances; migrants ? remittances; migrant remittances; money transfer; confidence intervals; data on remittance; development impact of remittances; independent variables; statistic; lagrange multiplier tests; flow of remittances; significance level; importance of remittances; instrumental variable; descriptive statistics; immigrant remittance; econometrics; emigrant remittances; international remittances; standard deviation; empirical exercise; equations; logarithm; data on remittance flows; data on remittances;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Loayza, Norman V. & Ranciere, Romain, 2006. "Financial Development, Financial Fragility, and Growth," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 38(4), pages 1051-1076, June.
  2. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers, Centre for Economic Performance, LSE dp0007, Centre for Economic Performance, LSE.
  3. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," NBER Working Papers 5879, National Bureau of Economic Research, Inc.
  4. Ralph Chami & Connel Fullenkamp & Samir Jahjah, 2005. "Are Immigrant Remittance Flows a Source of Capital for Development?," IMF Staff Papers, Palgrave Macmillan, vol. 52(1), pages 55-81, April.
  5. Levine, Ross & Loayza, Norman & Beck, Thorsten, 1999. "Financial intermediation and growth : Causality and causes," Policy Research Working Paper Series 2059, The World Bank.
  6. William Easterly, 2003. "Can Foreign Aid Buy Growth?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 17(3), pages 23-48, Summer.
  7. Arvind Subramanian & Raghuram Rajan, 2005. "What Undermines Aid's Impacton Growth?," IMF Working Papers 05/126, International Monetary Fund.
  8. Hansen, B.E., 1991. "Inference when a Nuisance Parameter is Not Identified Under the Null Hypothesis," RCER Working Papers 296, University of Rochester - Center for Economic Research (RCER).
  9. Dustmann, Christian & Kirchkamp, Oliver, 2001. "The Optimal Migration Duration and Activity Choice after Re-migration," IZA Discussion Papers 266, Institute for the Study of Labor (IZA).
  10. Djajic, Slobodan, 1986. "International migration, remittances and welfare in a dependent economy," Journal of Development Economics, Elsevier, Elsevier, vol. 21(2), pages 229-234, May.
  11. Beck, Thorsten & Levine, Ross & Loayza, Norman, 1999. "Finance and the sources of growth," Policy Research Working Paper Series 2057, The World Bank.
  12. Adams, Richard H, Jr, 1989. "Worker Remittances and Inequality in Rural Egypt," Economic Development and Cultural Change, University of Chicago Press, University of Chicago Press, vol. 38(1), pages 45-71, October.
  13. Ketkar, Suhas & Ratha, Dilip, 2001. "Development financing during a crisis : securitization of future receivables," Policy Research Working Paper Series 2582, The World Bank.
  14. Galor, Oded & Zeira, Joseph, 1988. "Income Distribution and Macroeconomics," MPRA Paper 51644, University Library of Munich, Germany, revised 01 Sep 1989.
  15. Mohammed El Qorchi & Samuel Munzele Maimbo & John F. Wilson, 2003. "Informal Funds Transfer Systems," IMF Occasional Papers 222, International Monetary Fund.
  16. Aghion, Philippe & Caroli, Eve & García-Peñalosa, Cecilia, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Scholarly Articles 12502063, Harvard University Department of Economics.
  17. El-Sakka, M. I. T. & McNabb, Robert, 1999. "The Macroeconomic Determinants of Emigrant Remittances," World Development, Elsevier, Elsevier, vol. 27(8), pages 1493-1502, August.
  18. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Végh, 2005. "When It Rains, It Pours: Procyclical Capital Flows and Macroeconomic Policies," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER Macroeconomics Annual 2004, Volume 19, pages 11-82 National Bureau of Economic Research, Inc.
  19. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, Elsevier, vol. 87(1), pages 115-143, August.
  20. Aghion, Philippe & Bolton, Patrick, 1997. "A Theory of Trickle-Down Growth and Development," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 64(2), pages 151-72, April.
  21. Greenwood, Jeremy & Jovanovic, Boyan, 1988. "Financial Development, Growth, And The Distribution Of Income," Working Papers, C.V. Starr Center for Applied Economics, New York University 88-12, C.V. Starr Center for Applied Economics, New York University.
  22. Edwards, Alejandra Cox & Ureta, Manuelita, 2003. "International migration, remittances, and schooling: evidence from El Salvador," Journal of Development Economics, Elsevier, Elsevier, vol. 72(2), pages 429-461, December.
  23. Rapoport, Hillel & Docquier, Frederic, 2006. "The Economics of Migrants' Remittances," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier, Elsevier.
  24. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, Elsevier, vol. 32(3), pages 513-542, December.
  25. Abhijit V. Banerjee & Andrew F. Newman, 1990. "Occupational Choice and the Process of Development," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 911, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  26. Barham, Bradford & Boucher, Stephen, 1998. "Migration, remittances, and inequality: estimating the net effects of migration on income distribution," Journal of Development Economics, Elsevier, Elsevier, vol. 55(2), pages 307-331, April.
  27. Russell, Sharon Stanton, 1986. "Remittances from international migration: A review in perspective," World Development, Elsevier, Elsevier, vol. 14(6), pages 677-696, June.
  28. Bruce E. Hansen, 1996. "Sample Splitting and Threshold Estimation," Boston College Working Papers in Economics, Boston College Department of Economics 319., Boston College Department of Economics, revised 12 May 1998.
  29. Sebnem Kalemli-Ozcan & Laura Alfaro & Selin Sayek & Areendam Chanda, 2002. "FDI and Economic Growth: The Role of Local Financial Markets," Macroeconomics, EconWPA 0212007, EconWPA.
  30. Richard H. Adams, Jr. & John Page, 2003. "International migration, remittances, and poverty in developing countries," Policy Research Working Paper Series 3179, The World Bank.
  31. Serdar Sayan, 2006. "Business Cycles and Workers' Remittances," IMF Working Papers 06/52, International Monetary Fund.
  32. Alejandra Cox Edwards & Manuelita Ureta, 2003. "International Migration, Remittances, and Schooling: Evidence from El Salvador," NBER Working Papers 9766, National Bureau of Economic Research, Inc.
  33. Adams, Richard H., Jr., 1991. "The effects of international remittances on poverty, inequality, and development in rural Egypt:," Research reports, International Food Policy Research Institute (IFPRI) 86, International Food Policy Research Institute (IFPRI).
  34. Adams, Richard H, Jr, 1998. "Remittances, Investment, and Rural Asset Accumulation in Pakistan," Economic Development and Cultural Change, University of Chicago Press, University of Chicago Press, vol. 47(1), pages 155-73, October.
  35. Adams, Richard H. Jr., 2003. "Economic growth, inequality, and poverty : findings from a new data set," Policy Research Working Paper Series 2972, The World Bank.
  36. J. Edward Taylor & Scott Rozelle & Alan deBrauw, 1999. "Migration, Remittances, and Agricultural Productivity in China," American Economic Review, American Economic Association, American Economic Association, vol. 89(2), pages 287-291, May.
  37. McCormick, Barry & Wahba, Jackline, 2000. "Overseas Employment and Remittances to a Dual Economy," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 110(463), pages 509-34, April.
  38. Puri, Shivani & Ritzema, Tineke, 1999. "Migrant worker remittances, micro-finance and the informal economy : prospects and issues," ILO Working Papers, International Labour Organization 357609, International Labour Organization.
  39. Adams, Richard H. Jr., 2003. "International migration, remittances, and the brain drain ; a study of 24 labor exporting countries," Policy Research Working Paper Series 3069, The World Bank.
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 in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:05/234. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi).

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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