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Do remittance fl ows promote financial inclusion?

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  • Immaculate Machasio

    (University of Giessen)

Abstract

In this paper, we evaluate whether remittances promote financial inclusion in developing countries. We construct an index of financial inclusion and present single equation estimates of the effects of remittances on financial inclusion. The paper uses data on remittance fl ows to 61 developing countries from different regions around the world spanning from 1990-2014 to explore this nexus. The study uses fixed effects estimations as well as GMM IV estimation method of panel data econometric analysis. The regression results confirm the hypothesis that remittances have an impact on financial inclusion through their effect on financial sector development. This can be intuitively explained by the fact that sending and receiving remittances increase senders and recipients use of financial services. The study shows that indeed remittances increase financial inclusion by about 2.49%. Remittances can therefore be considered a catalyst of financial inclusion in development.

Suggested Citation

  • Immaculate Machasio, 2018. "Do remittance fl ows promote financial inclusion?," MAGKS Papers on Economics 201826, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:201826
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    More about this item

    Keywords

    Remittances; Financial inclusion; Instrumental variables;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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