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Remittances, investment and growth in sub-Saharan Africa

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  • Emmanuel K.K. Lartey

Abstract

Several studies have examined the impact of remittances on economic growth, yet the results remain largely inconclusive. I present an analysis of the relationship between remittances and per capita growth, and investigate whether the impact of remittances on growth is through capital accumulation or other mechanisms. Using data for sub-Saharan African countries and dynamic empirical models, I find that there is a positive relationship between remittances and growth, as well as a positive interaction effect between remittances and financial depth on growth. The findings also reveal threshold values for two main indicators of financial development, above which the total effect of remittances on growth is positive. The results further provide evidence for the existence of an investment channel through which remittances affect growth, and indirect evidence that remittances contribute towards a stable macroeconomic environment, and hence, growth, through a consumption smoothing effect.

Suggested Citation

  • Emmanuel K.K. Lartey, 2013. "Remittances, investment and growth in sub-Saharan Africa," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(7), pages 1038-1058, October.
    • Handle: RePEc:taf:jitecd:v:22:y:2013:i:7:p:1038-1058
    DOI: 10.1080/09638199.2011.632692
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    References listed on IDEAS

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    1. Stephen Bond & Anke Hoeffler, 2001. "GMM Estimation of Empirical Growth Models," Economics Series Working Papers 2001-W21, University of Oxford, Department of Economics.
    2. Ms. Dalia S Hakura & Mr. Ralph Chami & Mr. Peter J Montiel, 2009. "Remittances: An Automatic Output Stabilizer?," IMF Working Papers 2009/091, International Monetary Fund.
    3. Stephen Bond & Anke Hoeffler & Jonathan Temple, 2001. "GMM Estimation of Empirical Growth Models," Economics Papers 2001-W21, Economics Group, Nuffield College, University of Oxford.
    4. Christopher P. Ball & Claude Lopez & Javier Reyes, 2013. "Remittances, Inflation and Exchange Rate Regimes in Small Open Economies," The World Economy, Wiley Blackwell, vol. 36(4), pages 487-507, April.
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