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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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    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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    Cited by:

    1. Taiwo, Kayode, 2020. "Do remittances spur economic growth in Africa?," MPRA Paper 111029, University Library of Munich, Germany, revised 2021.
    2. Ilham Haouas & Naceur Kheraief & Arusha Cooray & Syed Jawad Hussain Shahzad, 2019. "Time-Varying Casual Nexuses Between Remittances and Financial Development in Some MENA Countries," Working Papers 1294, Economic Research Forum, revised 2019.
    3. Inoue, Takeshi, 2018. "Financial development, remittances, and poverty reduction: Empirical evidence from a macroeconomic viewpoint," Journal of Economics and Business, Elsevier, vol. 96(C), pages 59-68.
    4. Anupam Das & Murshed Chowdhury, 2019. "Macroeconomic impacts of remittances in Bangladesh: The role of reverse flows," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 48(3), November.
    5. Le Thanh Tung, 2018. "The Impact Of Remittances On Domestic Investment In Developing Countries: Fresh Evidence From The Asia-Pacific Region," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 9(2).
    6. Gnimassoun, Blaise, 2015. "The importance of the exchange rate regime in limiting current account imbalances in sub-Saharan African countries," Journal of International Money and Finance, Elsevier, vol. 53(C), pages 36-74.
    7. Cazachevici, Alina & Havranek, Tomas & Horvath, Roman, 2019. "Remittances and Economic Growth: A Quantitative Survey," EconStor Preprints 205812, ZBW - Leibniz Information Centre for Economics.
    8. Burcak Polat, 2019. "The Impact of Workers' Remittances on Economic Growth: Panel Data Approach for Selected Country Group," Applied Economics and Finance, Redfame publishing, vol. 6(1), pages 45-52, January.
    9. Ranjan Kumar Dash, 2023. "Do Remittances Crowd-In or Crowd-Out Domestic Investment? An Empirical Analysis of 24 Low-Income Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(2), pages 1177-1193, June.
    10. Coulibaly, Dramane, 2015. "Remittances and financial development in Sub-Saharan African countries: A system approach," Economic Modelling, Elsevier, vol. 45(C), pages 249-258.
    11. Yosra Saidi, 2024. "Remittances and growth in Africa: Does financial development and institutional quality matter?," Economics Bulletin, AccessEcon, vol. 44(1), pages 163-172.
    12. Emmanuel K. K. Lartey, 2017. "Exchange Rate Flexibility and the Effect of Remittances on Economic Growth," Review of Development Economics, Wiley Blackwell, vol. 21(1), pages 103-125, February.
    13. Blaise Gnimassoun, 2014. "The importance of the exchange rate regime in limiting current account imbalances in sub-Saharan African countries," Working Papers hal-04141342, HAL.
    14. Cazachevici, Alina & Havranek, Tomas & Horvath, Roman, 2020. "Remittances and economic growth: A meta-analysis," World Development, Elsevier, vol. 134(C).
    15. Timo Baas & Silvia Maja Melzer, 2012. "The Macroeconomic Impact of Remittances: A sending country perspective," Norface Discussion Paper Series 2012021, Norface Research Programme on Migration, Department of Economics, University College London.
    16. Valentina VASILE & Daniel ŞTEFAN & Călin-Adrian COMES & Elena BUNDUCHI & Anamari-Beatrice ŞTEFAN, 2020. "FDI or Remittances for Sustainable External Financial Inflows. Theoretical Delimitations and Practical Evidence using Granger Causality," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 131-153, December.
    17. Moukpè Gniniguè & Essossinam Ali, 2022. "Migrant Remittances and Economic Growth in ECOWAS Countries: Does Digitalization Matter?," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 34(5), pages 2517-2542, October.
    18. Md. Qamruzzaman (a) and Wei Jianguo (b), 2020. "Nexus between Remittance and Household Consumption: Fresh Evidence from Symmetric or Asymmetric Investigation," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 45(3), pages 1-27, September.
    19. Ibrahim A. Adekunle & Sheriffdeen A. Tella, 2021. "Remittances and the Future of African Economies," Research Africa Network Working Papers 21/053, Research Africa Network (RAN).
    20. Njangang, Henri, 2018. "Does the size of the informal economy impede the impact of remittances on economic growth? Evidence from Sub-Saharan African countries," MPRA Paper 90187, University Library of Munich, Germany.
    21. 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.
    22. Adams, Samuel & Klobodu, Edem Kwame Mensah, 2016. "Remittances, regime durability and economic growth in Sub-Saharan Africa (SSA)," Economic Analysis and Policy, Elsevier, vol. 50(C), pages 1-8.
    23. Bang, James T. & Mitra, Aniruddha & Wunnava, Phanindra V., 2016. "Do remittances improve income inequality? An instrumental variable quantile analysis of the Kenyan case," Economic Modelling, Elsevier, vol. 58(C), pages 394-402.

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