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Impact of Remittances on Poverty and Financial Development in Sub-Saharan Africa

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Author Info
Smita Wagh
Sanjeev Gupta
Catherine A. Pattillo
Abstract

This paper assesses the impact of the steadily growing remittance flows to sub-Saharan Africa (SSA). Though the region receives only a small portion of the total recorded remittances to developing countries, and the volume of aid flows to SSA swamps remittances, this paper finds that remittances, which are a stable, private transfer, have a direct poverty mitigating effect, and promote financial development. These findings hold even after factoring in the reverse causality between remittances, poverty and financial development. The paper posits that formalizing such flows can serve as an effective access point for "unbanked" individuals and households, and that the effective use of such flows can mitigate the costs of skilled out-migration in SSA.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/38.

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Length: 43 pages
Date of creation: 26 Feb 2007
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Handle: RePEc:imf:imfwpa:07/38

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Keywords: Workers remittances ; Sub-Saharan Africa ; Poverty reduction ; Financial sector ; Development ;

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This paper has been announced in the following NEP Reports: 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.:
  1. Barham, Bradford & Boucher, Stephen, 1998. "Migration, remittances, and inequality: estimating the net effects of migration on income distribution," Journal of Development Economics, Elsevier, vol. 55(2), pages 307-331, April. [Downloadable!] (restricted)
  2. 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. [Downloadable!] (restricted)
    Other versions:
  3. George Samuels, 2003. "Banking unbanked immigrants through remittances," Communities and Banking, Federal Reserve Bank of Boston, issue Fall, pages 3-8. [Downloadable!]
  4. Toxopeus, Helen S. & Lensink, Robert, 2007. "Remittances and Financial Inclusion in Development," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  5. 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. [Downloadable!]
  6. Azam, Jean-Paul & Gubert, Flore, 2005. "Migrant Remittances and Economic Development in Africa: A Review of Evidence," IDEI Working Papers 354, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
  7. Alexandra Cox Edwards & Manuelita Ureta, 2003. "International Migration, Remittances, and Schooling: Evidence from El Salvador," NBER Working Papers 9766, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Yves Bourdet & Hans Falck, 2006. "Emigrants' remittances and Dutch Disease in Cape Verde," International Economic Journal, Korean International Economic Association, vol. 20(3), pages 267-284, September. [Downloadable!] (restricted)
  9. Thorsten Beck & Asli Demirguc-Kunt & Ross Levine, 2004. "Finance, Inequality, and Poverty: Cross-Country Evidence," NBER Working Papers 10979, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Amuedo-Dorantes, Catalina & Pozo, Susan, 2004. "Workers' Remittances and the Real Exchange Rate: A Paradox of Gifts," World Development, Elsevier, vol. 32(8), pages 1407-1417, August. [Downloadable!] (restricted)
  11. Raghuram Rajan & Arvind Subramanian, 2005. "What Undermines Aid's Impact on Growth?," IMF Working Papers 05/126, International Monetary Fund. [Downloadable!]
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  12. Ravallion, Martin, 1997. "Can high-inequality developing countries escape absolute poverty?," Economics Letters, Elsevier, vol. 56(1), pages 51-57, September. [Downloadable!] (restricted)
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  13. Lucas, Robert E B, 1987. "Emigration to South Africa's Mines," American Economic Review, American Economic Association, vol. 77(3), pages 313-30, June. [Downloadable!] (restricted)
  14. Nolvia N. Saca & Luis René Cáceres, 2006. "What Do Remittances Do? Analyzing the Private Remittance Transmission Mechanism in El Salvador," IMF Working Papers 06/250, International Monetary Fund. [Downloadable!]
  15. Bach, Stephen, 2006. "International Mobility of Health Professionals: Brain Drain or Brain Exchange?," Working Papers RP2006/82, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  16. Adams, Richard H., Jr., 1991. "The effects of international remittances on poverty, inequality, and development in rural Egypt:," Research reports 86, International Food Policy Research Institute (IFPRI). [Downloadable!]
  17. Enrica Detragiache & William Carrington, 1998. "How Big is the Brain Drain?," IMF Working Papers 98/102, International Monetary Fund.
  18. Gianmarco León & Valerie Koechlin, 2006. "International Remittances and Income Inequality: An Empirical Investigation," RES Working Papers 4475, Inter-American Development Bank, Research Department. [Downloadable!]
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  19. Samuel Munzele Maimbo & Mohammed El Qorchi & John F. Wilson, 2003. "Informal Funds Transfer Systems: An Analysis of the Informal Hawala System," IMF Occasional Papers 222, International Monetary Fund.
  20. Thierry Tressel & Enrica Detragiache & Poonam Gupta, 2005. "Finance in Lower Income Countries: An Empirical Exploration," IMF Working Papers 05/167, International Monetary Fund. [Downloadable!]
  21. Freund, Caroline & Spatafora, Nikola, 2005. "Remittances : transaction costs, determinants, and informal flows," Policy Research Working Paper Series 3704, The World Bank. [Downloadable!]
  22. Ralph Chami & Samir Jahjah & Connel Fullenkamp, 2003. "Are Immigrant Remittance Flows a Source of Capital for Development," IMF Working Papers 03/189, International Monetary Fund. [Downloadable!]
  23. Edwards, Alejandra Cox & Ureta, Manuelita, 2003. "International migration, remittances, and schooling: evidence from El Salvador," Journal of Development Economics, Elsevier, vol. 72(2), pages 429-461, December. [Downloadable!] (restricted)
  24. Paola Giuliano & Marta Ruiz-Arranz, 2005. "Remittances, Financial Development, and Growth," IMF Working Papers 05/234, International Monetary Fund. [Downloadable!]
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Cited by:
(explanations, 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. Andreas Billmeier & Isabella Massa, 2007. "What Drives Stock Market Development in the Middle East and Central Asia--Institutions, Remittances, or Natural Resources?," IMF Working Papers 07/157, International Monetary Fund. [Downloadable!]
  2. Charles Amo Yartey & Mihasonirina Andrianaivo, 2009. "Understanding the Growth of African Financial Markets," IMF Working Papers 09/182, International Monetary Fund. [Downloadable!]
  3. Ritha Sukadi, 2009. "Microfinance Institutions (MFIs) on the Remittances Market: Money Transfer Activity and Savings Mobilisation," Working Papers CEB 09-022.RS, Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB). [Downloadable!]
  4. O. Janet Adelegan, 2008. "Can Regional Cross-listings Accelerate Stock Market Development? Empirical Evidence from Sub-Saharan Africa," IMF Working Papers 08/281, International Monetary Fund. [Downloadable!]
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