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Remittances, Financial Development and Economic Growth: The Case of North African Countries

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  • Abida Zouheir
  • Imen Mohamed Sghaier

Abstract

The present paper examines the causal linkage between remittances, financial development, and economic growth in a panel of 4 countries of North Africa (Tunisia, Morocco, Algeria and Egypt) over the period 1980-2011. Using system Generalized Method of Moment (GMM) panel data analysis, we find strong evidence of a positive relationship between remittances and economic growth. We also find evidence that remittances appear to be working as a complement to financial development and, moreover, that the effect of remittances is more pronounced in the presence of the financial development variable. The policy implications of this study appeared clear. Improvement efforts need to be driven by local-level reforms to ensure the development of domestic financial system in order to take advantage of remittances.

Suggested Citation

  • Abida Zouheir & Imen Mohamed Sghaier, 2014. "Remittances, Financial Development and Economic Growth: The Case of North African Countries," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 17(51), pages 137-170, March.
    • Handle: RePEc:rej:journl:v:17:y:2014:i:51:p:137-170
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    Cited by:

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    2. Inoue, Takeshi, 2018. "Financial development, remittances, and poverty reduction: Empirical evidence from a macroeconomic viewpoint," Journal of Economics and Business, Elsevier, vol. 96(C), pages 59-68.
    3. James Temitope Dada & Taiwo Akinlo, 2023. "Remittances-Finance-Growth Trilogy: Do Remittance And Financial Development Complement Or Substitute Each Other To Affect Growth In Nigeria?," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 68(236), pages 105-138, January –.
    4. Tiru K. Jayaraman & Lin Sea Lau & Cheong Fatt Ng, 2018. "Role of Financial Sector Development as a Contingent Factor in the Remittances and Growth Nexus: A Panel Study of Pacific Island Countries," Remittances Review, Remittances Review, vol. 3(1), pages 51-74, May.
    5. Mowlaei , Mohammad, 2017. "Foreign Capital Inflows and Economic Growth of Iran," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 12(1), pages 37-54, January.
    6. Temitayo Olumide Olaniyan, 2019. "Interactive Effects of Remittances and Financial Sector Development on Economic Growth in Nigeria," Remittances Review, Remittances Review, vol. 4(1), pages 19-39, May.
    7. Izabela Sobiech, 2015. "Remittances, finance and growth: does financial development foster remittances and their impact on economic growth," FIW Working Paper series 158, FIW.

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    More about this item

    Keywords

    remittances; financial development; economic growth; panel data analysis;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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