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Do workers'remittances promote financial development ?

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Author Info
Aggarwal, Reena
Demirguc-Kunt, Asli
Martinez Peria, Maria Soledad

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Abstract

Workers'remittances to developing countries have become the second largest type of flows after foreign direct investment. The authors use data on workers'remittance flows to 99 developing countries from 1975-2003 to study the impact of remittances on financial sector development. In particular, they examine whether remittances contribute to increasing the aggregate level of deposits and credit intermediated by the local banking sector. This is an important question considering the extensive literature that has documented the growth-enhancing and poverty-reducing effects of financial development. The findings provide strong support for the notion that remittances promote financial development in developing countries.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3957.

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Date of creation: 01 Jul 2006
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Handle: RePEc:wbk:wbrwps:3957

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Keywords: Remittances Economic Theory&Research Pro-Poor Growth and Inequality Banks&Banking Reform Financial Economics

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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.:
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  3. 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)
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  6. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-86, June. [Downloadable!] (restricted)
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  20. Harrison, Ann E. & Love, Inessa & McMillan, Margaret S., 2004. "Global capital flows and financing constraints," Journal of Development Economics, Elsevier, vol. 75(1), pages 269-301, October. [Downloadable!] (restricted)
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  21. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December. [Downloadable!] (restricted)
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  22. Freund, Caroline & Spatafora, Nikola, 2005. "Remittances : transaction costs, determinants, and informal flows," Policy Research Working Paper Series 3704, The World Bank. [Downloadable!]
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  24. King, Robert G & Levine, Ross, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 717-37, August. [Downloadable!] (restricted)
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  25. Adams, Richard H. Jr., 2004. "Remittances and poverty in Guatemala," Policy Research Working Paper Series 3418, The World Bank. [Downloadable!]
  26. Menzie D. Chinn & Hiro Ito, 2002. "Capital Account Liberalization, Institutions and Financial Development: Cross Country Evidence," NBER Working Papers 8967, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  28. 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!]
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  32. 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)
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Full references

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. Laurent Gheeraert & Ritha Sukadi, 2007. "How Remittances impact national accounts – A macro analysis," Working Papers CEB 07-039.RS, Université Libre de Bruxelles, Solvay Business School, Centre Emile Bernheim (CEB). [Downloadable!]
  2. 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!]
  3. Erik Lueth & Marta Ruiz-Arranz, 2007. "A Gravity Model of Workers' Remittances," IMF Working Papers 06/290, International Monetary Fund. [Downloadable!]
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