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Credit Quality in Developing Economies; Remittances to the Rescue?

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  • Christian H Ebeke
  • Boileau Loko
  • Arina Viseth

Abstract

This paper analyzes the link between remittances inflows and nonperforming loans (NPLs) in a large sample of developing countries. Theoretical transmission channels include risk coping, exchange rate and growth impacts. Panel data estimates uncover the significant role of remittance inflows in reducing the size of NPLs in recipient economies. Econometric results also indicate a stronger marginal impact of remittances in a context of high macroeconomic instability, suggesting a significant effect of remittances on the likelihood of the private sector’s credit default during shocks. These results hold even after factoring in: (i) the endogeneity of remittance inflows and, (ii) the use of an alternative estimator (panel fractional logit) aimed at dealing with bounded dependent variables.

Suggested Citation

  • Christian H Ebeke & Boileau Loko & Arina Viseth, 2014. "Credit Quality in Developing Economies; Remittances to the Rescue?," IMF Working Papers 14/144, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:14/144
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    References listed on IDEAS

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    Cited by:

    1. World Bank Group, 2015. "Stocktaking of the Housing Sector in Sub-Saharan Africa," World Bank Other Operational Studies 23358, The World Bank.

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