Remittances inflow and economic growth nexus: evidence from emerging African economies in a post-COVID-19 Era

This paper studies the association of remittances inflow and economic growth in eleven African emerging economies from 1990 to 2022. Autoregressive distributed lag and cointegration techniques are applied to panel data from eleven countries. The study uses the mean group, pooled mean group, and dynamic fixed effects for robustness tests. The findings show that remittances significantly affect the gross domestic product growth rate negatively. Credit to the private sector negatively influences economic growth. Policymakers should prioritize a targeted response to the COVID-19 crisis by reducing the costs of access to vaccines and healthcare for the populace so that the received remittances will significantly impact the population’s welfare. African governments should recognize the importance of remittance inflows and reduce remittance costs by reducing taxes on remittances so that more remittances are sent home to boost economic growth. Governments should increase the formalization of remittance inbound transfers to improve the conditions of accessibility to financial services in emerging economies, which reduces the unbanked population. The monetary authorities should establish remittance-based policies that promote the use of formal channels, ease the pressure on emerging countries’ credit services, and improve foreign exchange rates, which would increase the amount of remittances received. Banks should create financial products and services that attract investments and growth for diaspora remittances in developing economies. This would promote financial inclusion and the effective use of credit by the private sector to boost economic growth.