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The link between remittance inflows and financial development in Ghana: Substitutes or complements?

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  • Kwadwo Boateng Prempeh
  • Christian Kyeremeh
  • Felix Kwabena Danso

Abstract

This empirical paper explores the link between remittance inflows and financial development in Ghana from 1980–2019. Empirical analyses are carried out using the ARDL VECM, DOLS, CCR and FMOLS techniques. Furthermore, the IRF and forecast FEVD analyses were employed to comprehend better financial development’s response to shocks to remittance inflows and other macroeconomic factors. The results demonstrate that the variables are cointegrated, and remittance was found to be beneficial to financial development in both the short and long run. Furthermore, from the IRF analysis, positive shocks to remittance have a favourable influence on financial development. The FEVD investigation suggests that shocks to migrant remittance accounted for almost 32% of the overall variations in financial development. The implication is that, from a policy perspective, well-structured strategies should be devised and executed to promote higher remittance flows via official conduits. This will stimulate economic growth, financial development, and other monetary benefits of remittance inflows to the nation.

Suggested Citation

  • Kwadwo Boateng Prempeh & Christian Kyeremeh & Felix Kwabena Danso, 2023. "The link between remittance inflows and financial development in Ghana: Substitutes or complements?," Cogent Economics & Finance, Taylor & Francis Journals, vol. 11(2), pages 2237715-223, June.
    • Handle: RePEc:taf:oaefxx:v:11:y:2023:i:2:p:2237715
    DOI: 10.1080/23322039.2023.2237715
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