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Harnessing remittances through formal channels for development in sub-saharan Africa

Author

Listed:
  • Francis M. Kemegue
  • Emmanuel Owusu-Sekyere
  • ReneŽ van Eyden

    (University of Pretoria, South Africa)

Abstract

This paper investigates how sub-Saharan African (SSA) countries could harness remittances through formal channels for development using annual data for 35 countries from 1980 to 2008.We control for country heterogeneity, endogeneity and cross-sectional dependence of the error term using the least square dummy variable (LSDV) estimator with Driscoll and Kraay (1998) corrected standard errors, the Kiviet (1995) bias-corrected LSDV estimator and feasible generalized least squares (FGLS) by Parks (1967) and Kmenta (1986). We find that financial deepening in the home country is critical to the use of formal channels and the ability of sub-Saharan African countries to harness remittances for development. Besides remitting home for altruistic reasons, sub-Saharan African migrants would also respond to investment opportunities in their home countries, contingent on a stable exchange rate. Sub-Saharan African migrants also remit more money home when their incomes increase in the host country.

Suggested Citation

  • Francis M. Kemegue & Emmanuel Owusu-Sekyere & ReneŽ van Eyden, 2014. "Harnessing remittances through formal channels for development in sub-saharan Africa," Journal of Developing Areas, Tennessee State University, College of Business, vol. 48(3), pages 321-337, July-Sept.
    • Handle: RePEc:jda:journl:vol.48:year:2014:issue3:pp:321-337
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    Cited by:

    1. Cornelia Serena, PASCA, 2016. "Monetary Remittance - Romania Case Study," Contemporary Economy Journal, Constantin Brancoveanu University, vol. 1(3), pages 50-59.

    More about this item

    Keywords

    Migration; Remittances; Sub-Saharan Africa;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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