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A Bounds Testing Analysis of Migrants Remittances and Financial Development in Selected Sub-Sahara African Countries


  • Taiwo Ajilore
  • Sylvanus Ikhide


The study investigated the short and long run impact of remittances on financial development, using country-level data on five selected sub-Saharan African countries, which are Cape-Verde, Lesotho, Nigeria, Senegal and Togo. The study utilized the Auto-Regressive Distributed Lag (ARDL) bounds testing approach for testing the existence of co-integration relationships. The study documented the existence of long-run level relationships between remittances and financial development, and documented evidences which show that remittances promote financial development in Cape Verde, Lesotho, Senegal and Togo, but not in Nigeria. The study advocated policies that encourage and facilitate the uninterrupted flow of remittances transfers, adequate institutions, regulatory strengthening and sound macroeconomic policies in the selected countries.

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  • Taiwo Ajilore & Sylvanus Ikhide, 2012. "A Bounds Testing Analysis of Migrants Remittances and Financial Development in Selected Sub-Sahara African Countries," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 4(2), pages 079-096, December.
  • Handle: RePEc:rfb:journl:v:04:y:2012:i:2:p:079-096

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    References listed on IDEAS

    1. Pesaran, M.H. & Shin, Y., 1995. "An Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis," Cambridge Working Papers in Economics 9514, Faculty of Economics, University of Cambridge.
    2. Pablo Fajnzylber & J. Humberto López, 2008. "Remittances and Development : Lessons from Latin America," World Bank Publications, The World Bank, number 6911, June.
    3. Sandrine Kablan, 2010. "Banking Efficiency and Financial Development in Sub-Saharan Africa," IMF Working Papers 10/136, International Monetary Fund.
    4. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
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    6. Paresh Kumar Narayan, 2005. "The structure of tourist expenditure in Fiji: evidence from unit root structural break tests," Applied Economics, Taylor & Francis Journals, vol. 37(10), pages 1157-1161.
    7. Subrata Ghatak & Jalal Siddiki, 2001. "The use of the ARDL approach in estimating virtual exchange rates in India," Journal of Applied Statistics, Taylor & Francis Journals, vol. 28(5), pages 573-583.
    8. Maurizio Bussolo & María Soledad Martínez Peria & César Calderón & Yira Mascaró & Mette E. Nielsen & Pablo Acosta & J. Humberto López & Çaglar Özden & Yoko Niimi & Luis Molina & Florencia Moizeszowicz, 2008. "Remittances and Development: Lessons from Latin America," IDB Publications (Books), Inter-American Development Bank, number 59678 edited by J. Humberto López & Pablo Fajnzylber, February.
    9. Alejandra Cox Edwards & Manuelita Ureta, 2003. "International Migration, Remittances, and Schooling: Evidence from El Salvador," NBER Working Papers 9766, National Bureau of Economic Research, Inc.
    10. Rapoport, Hillel & Docquier, Frederic, 2006. "The Economics of Migrants' Remittances," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
    11. Michael W. Klein & Giovanni P. Olivei, 1999. "Capital account liberalization, financial depth, and economic growth," Working Papers 99-6, Federal Reserve Bank of Boston.
    12. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    13. Sandrine Kablan, 2009. "Banking Efficiency and Financial Development in Sub-Saharan Africa (SSA)," The African Finance Journal, Africagrowth Institute, vol. 11(2), pages 28-50.
    14. Woodruff, Christopher & Zenteno, Rene, 2007. "Migration networks and microenterprises in Mexico," Journal of Development Economics, Elsevier, vol. 82(2), pages 509-528, March.
    15. Ketkar, Suhas & Ratha, Dilip, 2001. "Development financing during a crisis : securitization of future receivables," Policy Research Working Paper Series 2582, The World Bank.
    16. 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.
    17. repec:idb:brikps:59678 is not listed on IDEAS
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