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Financial development, international migrant remittances and endogenous growth in Ghana

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  • Deodat E. Adenutsi

Abstract

Purpose - The purpose of this paper is to provide further insights into understanding the finance-growth nexus by verifying the hypothesis that financial development promotes economic growth through its capacity to attract increased international migrant remittances to Ghana. Design/methodology/approach - A dynamic equilibrium-correction mechanism model for the period 1987(3)-2007(4) was estimated following the Johansen cointegration procedure. This approach produced maximum likelihood estimators of the unconstrained cointegrating vector, and suggested the number of cointegrating vectors without relying on an arbitrary normalization. Findings - The findings reveal two stylized facts with reference to Ghana. First, although financial development Granger-causes international migrant remittance inflows, it is in itself directly detrimental to endogenous growth. Second, international migrant remittance inflows are statistically significant in explaining variations in endogenous growth in the short run as well as in the long run. Practical implications - Since directly, financial development hampers endogenous growth, but Granger-causes increased inflows of migrant remittances, and these remittances impact positively but marginally on endogenous growth, it follows that the sequencing of implementing Ghana's financial reform programmes should be re-examined, whilst an enabling environment is created to induce Ghanaians living abroad to remit home through official channels. Originality/value - International migrant remittances were found to be statistically significant in promoting endogenous growth, albeit marginally. Financial development does not directly engender growth, unless it succeeds in attracting non-debt foreign capital in the form of remittances through the formal sector. Financial development causes migrant remittance inflows which impact positively on growth.

Suggested Citation

  • Deodat E. Adenutsi, 2011. "Financial development, international migrant remittances and endogenous growth in Ghana," Studies in Economics and Finance, Emerald Group Publishing, vol. 28(1), pages 68-89, March.
  • Handle: RePEc:eme:sefpps:v:28:y:2011:i:1:p:68-89
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Nyamongo, Esman Morekwa & Misati, Roseline N. & Kipyegon, Leonard & Ndirangu, Lydia, 2012. "Remittances, financial development and economic growth in Africa," Journal of Economics and Business, Elsevier, vol. 64(3), pages 240-260.
    2. Opoku, Richard Takyi & Ackah, Ishmael, 2015. "How responsive are private savings to changes in real interest rate in Ghana?," MPRA Paper 65040, University Library of Munich, Germany.
    3. Mohammad Salahuddin & Jeff Gow, 2015. "The relationship between economic growth and remittances in the presence of cross-sectional dependence," Journal of Developing Areas, Tennessee State University, College of Business, vol. 49(1), pages 207-221, January-M.
    4. Tchantchane, A. & Rodrigues, G. & Fortes, P.C., 2013. "An Empirical Study on the importance of Remittance and Educational Expenditure on Growth: Case of the Philippines," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 13(1), pages 173-186.
    5. Wadood, Syed Naimul & Hossain, Md. Amzad, 2015. "Impact of Overseas Remittances on Economic Growth: Evidences from Bangladesh," MPRA Paper 81657, University Library of Munich, Germany.
    6. Kristina Matuzeviciute & Mindaugas Butkus, 2016. "Remittances, Development Level, and Long-Run Economic Growth," Economies, MDPI, Open Access Journal, vol. 4(4), pages 1-20, December.
    7. Samuel Antwi & Ebenezer Fiifi Emire Atta Mills & Xicang Zhao, 2013. "Impact of Macroeconomic Factors on Economic Growth in Ghana: A Cointegration Analysis," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 3(1), pages 35-45, January.
    8. Wadood, Syed Naimul & Hossain, Md. Amzad, 2016. "Microeconomic Impact of Remittances on Household Welfare: Evidences from Bangladesh," MPRA Paper 76956, University Library of Munich, Germany.
    9. repec:eee:riibaf:v:42:y:2017:i:c:p:1413-1427 is not listed on IDEAS
    10. Adenutsi, Deodat E., 2010. "Financial development, bank savings mobilization and economic performance in Ghana: evidence from a multivariate structural VAR," MPRA Paper 29571, University Library of Munich, Germany.
    11. Gloria Clarissa O. Dzeha, 2016. "The decipher, theory or empirics: a review of remittance studies," African Journal of Accounting, Auditing and Finance, Inderscience Enterprises Ltd, vol. 5(2), pages 113-134.
    12. Izabela Sobiech, 2015. "Remittances, finance and growth: does financial development foster remittances and their impact on economic growth," FIW Working Paper series 158, FIW.

    More about this item

    Keywords

    Economic growth; Migrant workers; Ghana; Money;

    JEL classification:

    • F3 - International Economics - - International Finance
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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