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Can Remittances Spur Economic Growth and Development? Evidence from Latin American Countries (LACs)


  • Bichaka Fayissa
  • Christian Nsiah


For the last five decades, there have been heated debates on the sources of economic growth in developing economies. The perceived factors of economic growth have ranged from surplus labor to investment in human and physical capital, transfer of technological change, overseas development assistance, flow of private capital, increasing returns from investment in new ideas and research and development. The impacts of the above listed traditional sources of economic growth have been well documented in literature. Researchers have also considered the importance of institutional factors such as the role of political freedom, political instability, voice and accountability on economic growth and development. Despite the increased size of remittances in the total international capital flows, however, the relationship between remittances and economic growth has not been adequately studied. This study explores the aggregate impact of remittances on the economic growth of 18 Latin American Countries within the conventional neoclassical growth framework using an unbalanced panel data spanning from 1980 to 2005. We find that remittances have a positive and significant effect on the growth of Latin American Countries where the financial systems are less developed by providing an alternative way to finance investment and helping overcome liquidity constraints.

Suggested Citation

  • Bichaka Fayissa & Christian Nsiah, 2010. "Can Remittances Spur Economic Growth and Development? Evidence from Latin American Countries (LACs)," Working Papers 201006, Middle Tennessee State University, Department of Economics and Finance.
  • Handle: RePEc:mts:wpaper:201006

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    Cited by:

    1. Jawad, Muhammad & Qayyum, Abdul, 2015. "Modeling the Impact of Policy Environment on Inflows of Worker’s Remittances in Pakistan: A Multivariate Analysis," MPRA Paper 62019, University Library of Munich, Germany, revised 2015.
    2. Syed Tehseen Jawaid & Syed Ali Raza, 2012. "Workers' remittances and economic growth in China and Korea: an empirical analysis," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, vol. 5(3), pages 185-193, September.
    3. Muhammad Qasim & Amatul Razzaq Chaudhary, 2015. "Determinants of Human Development Disparities: A Cross District Analysis of Punjab, Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 54(4), pages 427-446.
    4. repec:bpj:glecon:v:13:y:2017:i:1:p:12:n:4 is not listed on IDEAS
    5. Jamal Bouoiyour & Refk Selmi & Amal Miftah, 2017. "Relationship Between Remittances and Macroeconomic Variables in Times of Political and Social Upheaval: Evidence from Tunisia's Arab Spring," Working Papers 1140, Economic Research Forum, revised 09 2003.
    6. Jawaid, Syed Tehseen & Raza, Syed Ali, 2012. "Workers’ Remittances and Economic Growth in South Asia," MPRA Paper 39001, University Library of Munich, Germany.
    7. Martin-Mayoral, Fernando & Proaño, Maria Belén, 2012. "Las remesas en América Latina, ¿amenaza u oportunidad?
      [Remittances in Latin America, a threat or an opportunity?]
      ," MPRA Paper 43730, University Library of Munich, Germany.
    8. Miguel Ángel Mendoza González & Marcos Valdivia López, 2016. "Remesas, crecimiento y convergencia regional en México: aproximación con un modelo panel-espacial," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 31(1), pages 125-167.
    9. Jawaid, Syed Tehseen & Raza, Syed Ali, 2012. "Remittances, Growth and Convergence: Evidence from Developed and Developing Countries," MPRA Paper 39002, University Library of Munich, Germany.
    10. repec:rss:jnljfe:v1i4p3 is not listed on IDEAS
    11. Kalandi Charan PRADHAN, 2016. "Does remittance drive economic growth in emerging economies: Evidence from FMOLS and Panel VECM," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(609), W), pages 57-74, Winter.

    More about this item


    Workers’ Remittances; Economic Growth; Panel Data; Arellano-Bond; Latin American Countries;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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