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Remittances and Investment

Author

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  • Bjuggren, Per-Olof

    (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)

  • Dzansi, James

    () (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)

  • Shukur, Ghazi

    (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)

Abstract

This paper studies the impact of remittances on investment. Workers’ remittances to developing countries have grown to be an important source of financing, amounting to around $300 billion a year. The funds are used for both consumption and investment in the home countries of the migrants. The importance of financial and institutional framework in the receiving countries and how they interact with remittances is stressed. Data on remittance flow to 79 developing countries during 1995-2005 is used. Dynamic panel data approach is applied for this purpose. The results reveal that remittances, high quality institutional framework and well developed credit market increase investment. However, it is also found that the marginal importance of remittances as a financial source for investment decreases with improved institutional framework and a more developed credit market.

Suggested Citation

  • Bjuggren, Per-Olof & Dzansi, James & Shukur, Ghazi, 2010. "Remittances and Investment," Working Paper Series in Economics and Institutions of Innovation 216, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  • Handle: RePEc:hhs:cesisp:0216
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Fatma MABROUK & Jacob ODUOR & Abebe SHIMELES, 2015. "Remittances and Youth Labor Market Participation in Africa," Cahiers du GREThA 2015-32, Groupe de Recherche en Economie Théorique et Appliquée.
    2. Nahed Zghidi & Zouheir Abid, 2015. "Remittances, Economic Freedom, and Economic Growth in North African Countries," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 18(58), pages 139-162, December.
    3. Jouini, Jamel, 2015. "Economic growth and remittances in Tunisia: Bi-directional causal links," Journal of Policy Modeling, Elsevier, vol. 37(2), pages 355-373.
    4. Gloria Clarissa O. Dzeha, 2016. "The decipher, theory or empirics: a review of remittance studies," African Journal of Accounting, Auditing and Finance, Inderscience Enterprises Ltd, vol. 5(2), pages 113-134.
    5. International Monetary Fund, 2014. "Former Yugoslav Republic of Macedonia; Selected Issues," IMF Staff Country Reports 14/232, International Monetary Fund.
    6. Malik, Saif Ullah, 2013. "Role of Foreign Private Investment and Remittance in Stock Market Development: Study of South Asia," MPRA Paper 54530, University Library of Munich, Germany.
    7. Emmanuel K.K. Lartey, 2016. "The Cyclicality Of Remittances In Sub-Saharan Africa," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 41(1), pages 1-18, March.
    8. Fatima, Kiran & Qayyum, Abdul, 2016. "Remittances and Asset Accumulation of Household in Pakistan," MPRA Paper 72945, University Library of Munich, Germany.
    9. Michael Clemens and Timothy N. Ogden, 2014. "Migration as a Strategy for Household Finance: A Research Agenda on Remittances, Payments, and Development- Working Paper 354," Working Papers 354, Center for Global Development.

    More about this item

    Keywords

    Remittances; Investment; Institutions; Financial Development; Dynamic Panel Data;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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