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Financial Development, Remittances and Economic Growth: Evidence Using a Dynamic Panel Estimation

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  • Murshed Chowdhury

    (Murshed Chowdhury is Assistant Professor at the Department of Business and Economics, Algoma University, 1520 Queen Street East, Sault Ste. Marie, ON, Canada P6A 2G4, email: murshed.chowdhury@algomau.ca)

Abstract

This study examines how remittances can influence economic growth under different levels of financial development. Using a dynamic panel estimation of 33 top remittance-recipient developing countries from 1979 to 2011, the results suggest that financial development neither works as a substitute nor a complement for the remittance–growth nexus. While remittances are effective in promoting economic growth, the influence of financial variables is found to be insignificant. More developed financial systems may attract more remittances; however, the interaction effect of financial development and remittances is not growth enhancing. Promoting financial literacy, reducing the cost of sending remittances through banks and encouraging the overall use of formal financial institutions may induce a stronger remittance–growth nexus. JEL Classification: F24, F41, F63, F68

Suggested Citation

  • Murshed Chowdhury, 2016. "Financial Development, Remittances and Economic Growth: Evidence Using a Dynamic Panel Estimation," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 10(1), pages 35-54, February.
    • Handle: RePEc:sae:mareco:v:10:y:2016:i:1:p:35-54
    DOI: 10.1177/0973801015612666
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    Keywords

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    JEL classification:

    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • F68 - International Economics - - Economic Impacts of Globalization - - - Policy

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