Do Financial and Institutional Variables Enhance the Impact of Remittances on Economic Growth in Latin America and the Caribbean? A Panel Cointegration Analysis
AbstractUsing recently developed panel unit root and panel cointegration tests and the Fully-Modified OLS methodology, this paper estimates the impact of remittances on the economic growth of selected upper and lower income Latin American & Caribbean (LAC) countries over the 1990-2007 period. Despite the large flow of remittances to the region, there have been relatively few empirical studies assessing the impact of remittances on economic growth in LAC. Panel unit root tests suggest that several of the macro variables included in the model exhibit unit roots, yet, at the same time, Pedroni’s panel cointegration test determined that there is a cointegrating relationship among the variables in the estimated model. The FMOLS estimates suggest that remittances have a positive and significant effect on economic growth in both groups of countries. The estimates also indicate that both the degree of economic freedom and credit provided by the banking system have a positive and significant effect on economic growth in upper (middle) income LAC countries. The sign of the interaction term between remittances and the credit (and EFI) variables suggest that remittances act as substitutes for these variables. Finally, the effect of remittances on both sets of countries is stronger in the presence of a financial (credit) variable.
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Bibliographic InfoPaper provided by Trinity College, Department of Economics in its series Working Papers with number 1202.
Length: 30 pages
Date of creation: May 2012
Date of revision:
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Web page: http://www.trincoll.edu/Academics/MajorsAndMinors/Economics/Pages/default.aspx
More information through EDIRC
Credit; Economic Freedom Index (EFI); FMOLS; Latin America & Caribbean; Remittances and Growth; Panel Cointegration; Panel Unit Roots;
Other versions of this item:
- Miguel Ramirez, 2013. "Do Financial and Institutional Variables Enhance the Impact of Remittances on Economic Growth in Latin America and the Caribbean? A Panel Cointegration Analysis," International Advances in Economic Research, Springer, vol. 19(3), pages 273-288, August.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
- O54 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
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