IDEAS home Printed from https://ideas.repec.org/a/rbs/ijbrss/v11y2022i4p171-182.html
   My bibliography  Save this article

Dynamics of the remittances: Fnancial development nexus in Sub Saharan Africa (SSA)

Author

Listed:
  • Strike Mbulawa

    (Head of Department, Accounting & Finance, Faculty of Business & Accounting, Botho University, Botho Education Park, Kgale, Gaborone, Botswana)

  • Samuel Chingoiro

    (Faculty of Business & Accounting, Botho University, Botho Education Park, Kgale, Gaborone, Botswana)

  • Robert Machera

    (Faculty of Business & Accounting, Botho University, Botho Education Park, Kgale, Gaborone, Botswana)

Abstract

This paper explores the inter-connectedness of remittances and financial development and how their associated covariates such as savings, investment, money supply and economic growth are impacted by this relationship. The study employs a panel vector autoregression (P-VAR) estimation technique, and the generalized methods of moments (GMM) are applied after removing fixed effects and lagged regressors are used as instruments to have consistent estimators. The main findings of the study demonstrate that (i) remittances and financial development have a feedback interrelationship, and some interlinkages are identified amongst their covariates, (ii) economic growth has a dual connection with financial development and that (iii) savings, investment, and broad money supply influence both financial development and remittances. These findings contribute to current discussions in the literature as they support the importance of deepening financial markets in SSA, and attracting more remittances. The significant role played by the diaspora in improving domestic financial depth is confirmed. Progression in SSA economic growth helps to stimulate those in the diaspora to repatriate most of their earnings back home. Key Words:Remittances, Financial Development, Sub Saharan Africa, Panel Vector autoregression

Suggested Citation

  • Strike Mbulawa & Samuel Chingoiro & Robert Machera, 2022. "Dynamics of the remittances: Fnancial development nexus in Sub Saharan Africa (SSA)," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 11(4), pages 171-182, June.
    • Handle: RePEc:rbs:ijbrss:v:11:y:2022:i:4:p:171-182
    DOI: 10.20525/ijrbs.v11i4.1757
    as

    Download full text from publisher

    File URL: https://www.ssbfnet.com/ojs/index.php/ijrbs/article/view/1757/1290
    Download Restriction: no
    File URL: https://doi.org/10.20525/ijrbs.v11i4.1757
    Download Restriction: no
    File URL: https://libkey.io/10.20525/ijrbs.v11i4.1757?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Ibrahim Ahamada & Dramane Coulibaly, 2013. "Remittances And Growth In Sub‐Saharan African Countries: Evidence From A Panel Causality Test," Journal of International Development, John Wiley & Sons, Ltd., vol. 25(3), pages 310-324, April.
    2. Naqeeb Ur Rehman & Eglantina Hysa & Wai Ching Poon, 2021. "The effect of financial development and remittances on economic growth," Cogent Economics & Finance, Taylor & Francis Journals, vol. 9(1), pages 1932060-193, January.
    3. D. O. Olayungbo & Ahmod Quadri, 2019. "Remittances, financial development and economic growth in sub-Saharan African countries: evidence from a PMG-ARDL approach," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 5(1), pages 1-25, December.
    4. Guglielmo Maria Caporale & Christophe Rault & Anamaria Diana Sova & Robert Sova, 2015. "Financial Development and Economic Growth: Evidence from 10 New European Union Members," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 20(1), pages 48-60, January.
    5. Swamy, Vighneswara & Dharani, Munusamy, 2019. "The dynamics of finance-growth nexus in advanced economies," International Review of Economics & Finance, Elsevier, vol. 64(C), pages 122-146.
    6. Michael R. M. Abrigo & Inessa Love, 2016. "Estimation of panel vector autoregression in Stata," Stata Journal, StataCorp LP, vol. 16(3), pages 778-804, September.
    7. Cazachevici, Alina & Havranek, Tomas & Horvath, Roman, 2020. "Remittances and economic growth: A meta-analysis," World Development, Elsevier, vol. 134(C).
    8. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    9. Deodat E. Adenutsi & Meshach J. Aziakpono & Matthew K. Ocran, 2011. "The Changing Impact Of Macroeconomic Environment On Remittance Inflows In Sub-Saharan Africa," Journal of Academic Research in Economics, Spiru Haret University, Faculty of Accounting and Financial Management Constanta, vol. 3(2 (July)), pages 136-167.
    10. Kais Mtar & Walid Belazreg, 2021. "Causal Nexus Between Innovation, Financial Development, and Economic Growth: the Case of OECD Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(1), pages 310-341, March.
    11. Pamela Efua Ofori & Daryna Grechyna & Muhammad Shafiullah, 2021. "Remittances, natural resource rent and economic growth in Sub-Saharan Africa," Cogent Economics & Finance, Taylor & Francis Journals, vol. 9(1), pages 1979305-197, January.
    12. Tekilu Tadesse & Jemal Abafia, 2019. "The causality between Financial Development and Economic Growth in Ethiopia: Supply Leading vs Demand Following Hypothesis," Journal of Economics and Financial Analysis, Tripal Publishing House, vol. 3(1), pages 87-115.
    13. Siphe-okuhle Fakudze & Asrat Tsegaye & Kin Sibanda, 2021. "The relationship between financial development and economic growth in Eswatini (formerly Swaziland)," African Journal of Economic and Management Studies, Emerald Group Publishing Limited, vol. 13(1), pages 15-28, October.
    14. Biplab Kumar Guru & Inder Sekhar Yadav, 2019. "Financial development and economic growth: panel evidence from BRICS," Journal of Economics, Finance and Administrative Science, Emerald Group Publishing Limited, vol. 24(47), pages 113-126, February.
    15. Janice Tieguhong Puatwoe & Serge Mandiefe Piabuo, 2017. "Financial sector development and economic growth: evidence from Cameroon," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 3(1), pages 1-18, December.
    16. Jamal Bouoiyour & Refk Selmi & Amal Miftah, 2019. "The relationship between remittances and macroeconomic variables in times of political and social upheaval: Evidence from Tunisia's Arab Spring," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 27(2), pages 355-394, February.
    17. France Maphosa, 2007. "Remittances and development: the impact of migration to South Africa on rural livelihoods in southern Zimbabwe," Development Southern Africa, Taylor & Francis Journals, vol. 24(1), pages 123-136.
    18. repec:hal:pseose:hal-00674688 is not listed on IDEAS
    19. Reinhart, Carmen M. & Talvi, Ernesto, 1998. "Capital flows and saving in Latin America and Asia: a reinterpretation," Journal of Development Economics, Elsevier, vol. 57(1), pages 45-66, October.
    20. Mehmet Balcilar & Serhan Çiftçioğlu & Hasan Güngör, 2016. "The Effects Of Financial Development On Investment In Turkey," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 61(04), pages 1-21, September.
    21. Chinenye Ifeoma Nwokolo & Matthew Ikechukwu Ogbuagu & Wakeel Atanda Isola, 2021. "Migrant’s remittance and investment financing nexus in Africa: Does investment climate matter?," Future Business Journal, Springer, vol. 7(1), pages 1-11, December.
    22. Acosta, Pablo A. & Lartey, Emmanuel K.K. & Mandelman, Federico S., 2009. "Remittances and the Dutch disease," Journal of International Economics, Elsevier, vol. 79(1), pages 102-116, September.
    23. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    24. Love, Inessa & Zicchino, Lea, 2006. "Financial development and dynamic investment behavior: Evidence from panel VAR," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(2), pages 190-210, May.
    25. Čeh Časni Anita & Dumičić Ksenija & Tica Josip, 2016. "The Panel VAR Approach to Modelling the Housing Wealth Effect: Evidence from selected European post-transition economies," Naše gospodarstvo/Our economy, Sciendo, vol. 62(4), pages 23-32, December.
    26. Aggarwal, Reena & Demirgüç-Kunt, Asli & Pería, Maria Soledad Martínez, 2011. "Do remittances promote financial development?," Journal of Development Economics, Elsevier, vol. 96(2), pages 255-264, November.
    27. Farid Makhlouf, 2019. "Is Productivity Affected by Remittances? The Evidence from Morocco," Journal of International Development, John Wiley & Sons, Ltd., vol. 31(2), pages 211-222, March.
    28. Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-144, January.
    29. Peter Quartey & Clement Adamba, 2015. "Inter-linkages between international and internal remittances and financial sector development in Ghana," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 10(3), pages 229-246.
    30. Adolfo Barajas & Ralph Chami & Connel Fullenkamp & Anjali Garg, 2010. "The Global Financial Crisis and Workers' Remittances to Africa: What's the Damage?," Journal of African Development, African Finance and Economic Association (AFEA), vol. 12(1), pages 73-96.
    31. Fromentin, Vincent, 2017. "The long-run and short-run impacts of remittances on financial development in developing countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 66(C), pages 192-201.
    32. Forget Mingiri Kapingura & Paul Alagidede, 2016. "The relationship between financial sector development and savings mobilisation in South Africa: An empirical study," Development Southern Africa, Taylor & Francis Journals, vol. 33(5), pages 703-718, September.
    33. Nicholas Odhiambo, 2010. "Finance-investment-growth nexus in South Africa: an ARDL-bounds testing procedure," Economic Change and Restructuring, Springer, vol. 43(3), pages 205-219, August.
    34. Peter Quartey & Charles Ackah & Monica Puoma Lambon-Quayefio, 2018. "Inter-linkages between remittance and savings in Ghana," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 46(1), pages 152-166, August.
    35. Vincent Fromentin, 2017. "The long-run and short-run impacts of remittances on financial development in developing countries," Post-Print halshs-02152600, HAL.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Thi My Hanh Nguyen & Thi Khanh Linh Nguyen & Xuan Truong Pham, 2024. "Impacts of financial globalization on CO2 emissions in Asian countries and implications for Vietnam," Asia-Pacific Journal of Regional Science, Springer, vol. 8(4), pages 993-1015, December.
    2. James Temitope Dada & Taiwo Akinlo, 2023. "Remittances-Finance-Growth Trilogy: Do Remittance And Financial Development Complement Or Substitute Each Other To Affect Growth In Nigeria?," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 68(236), pages 105-138, January –.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Boris Fisera & Menbere Workie Tiruneh, 2023. "Beyond the Balassa-Samuelson Effect: Do Remittances Trigger the Dutch Disease?," Eastern European Economics, Taylor & Francis Journals, vol. 61(1), pages 23-65, January.
    2. Kacou Yves Thierry Kacou & Yacouba Kassouri & Andrew Adewale Alola & Mehmet Altuntaş, 2022. "Examining the sustainable development approach of migrants' remittances and financial development in sub‐Saharan African countries," Sustainable Development, John Wiley & Sons, Ltd., vol. 30(5), pages 804-816, October.
    3. S. Bolarinwa, Thompson & O. Akinbobola, Temidayo, 2021. "Remittances-Financial Development Nexus: Causal Evidence From Four African Countries," Ilorin Journal of Economic Policy, Department of Economics, University of Ilorin, vol. 8(1), pages 1-17, June.
    4. Fromentin, Vincent & Leon, Florian, 2019. "Remittances and credit in developed and developing countries: A dynamic panel analysis," Research in International Business and Finance, Elsevier, vol. 48(C), pages 310-320.
    5. Wu, Chen & Nsiah, Christian & Fayissa, Bichaka, 2023. "Analyzing the differential impacts of financial sector development on remittance inflows," Research in Economics, Elsevier, vol. 77(2), pages 239-250.
    6. Francois, John Nana & Ahmad, Nazneen & Keinsley, Andrew & Nti-Addae, Akwasi, 2022. "Heterogeneity in the long-run remittance-output relationship: Theory and new evidence," Economic Modelling, Elsevier, vol. 110(C).
    7. Sleibi, Yacoub & Casalin, Fabrizio & Fazio, Giorgio, 2020. "Bank-specific shocks and aggregate leverage: Empirical evidence from a panel of developed countries," Journal of Financial Stability, Elsevier, vol. 49(C).
    8. Khalid, Usman & Shafiullah, Muhammad, 2021. "Financial development and governance: A panel data analysis incorporating cross-sectional dependence," Economic Systems, Elsevier, vol. 45(2).
    9. Ryan H. Murphy & Colin O’Reilly, 2019. "Applying panel vector autoregression to institutions, human capital, and output," Empirical Economics, Springer, vol. 57(5), pages 1633-1652, November.
    10. Trofimov, Ivan D., 2022. "Determinants of the profit rates in the OECD economies: A panel data analysis of the Kalecki's profit equation," Structural Change and Economic Dynamics, Elsevier, vol. 61(C), pages 380-397.
    11. Björn Brey & Matthias S. Hertweck, 2023. "The dynamic effects of monsoon rainfall shocks on agricultural yield, wages, and food prices in India," Scandinavian Journal of Economics, Wiley Blackwell, vol. 125(3), pages 616-654, July.
    12. Charles Shaaba Saba & Nicholas Ngepah, 2022. "Nexus between telecommunication infrastructures, defence and economic growth: a global evidence," Netnomics, Springer, vol. 22(2), pages 139-177, October.
    13. Ait Benhamou, Zouhair & Cassin, Lesly, 2021. "The impact of remittances on savings, capital and economic growth in small emerging countries," Economic Modelling, Elsevier, vol. 94(C), pages 789-803.
    14. Aslan, Alper & Ocal, Oguz & Ozsolak, Baki & Ozturk, Ilhan, 2022. "Renewable energy and economic growth relationship under the oil reserve ownership: Evidence from panel VAR approach," Renewable Energy, Elsevier, vol. 188(C), pages 402-410.
    15. Carlos Alberto Piscarreta Pinto Ferreira, 2021. "Does Public Debt Ownership Structure Matter for a Borrowing Country?," Working Papers REM 2021/0190, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    16. de Almeida, Sivanildo José & Esperidião, Fernanda & de Moura, Fábio Rodrigues, 2024. "The impact of institutions on economic growth: Evidence for advanced economies and Latin America and the Caribbean using a panel VAR approach," International Economics, Elsevier, vol. 178(C).
    17. Wang, Jing & Rickman, Dan S. & Yu, Yihua, 2022. "Dynamics between global value chain participation, CO2 emissions, and economic growth: Evidence from a panel vector autoregression model," Energy Economics, Elsevier, vol. 109(C).
    18. Acheampong, Alex O. & Dzator, Janet & Savage, David A., 2021. "Renewable energy, CO2 emissions and economic growth in sub-Saharan Africa: Does institutional quality matter?," Journal of Policy Modeling, Elsevier, vol. 43(5), pages 1070-1093.
    19. P. Jijin & Alok Kumar Mishra & M. Nithin, 2022. "Macroeconomic determinants of remittances to India," Economic Change and Restructuring, Springer, vol. 55(2), pages 1229-1248, May.
    20. Pazouki, Azadeh & Zhu, Xiaoxian, 2022. "The dynamic impact among oil dependence volatility, the quality of political institutions, and government spending," Energy Economics, Elsevier, vol. 115(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rbs:ijbrss:v:11:y:2022:i:4:p:171-182. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Umit Hacioglu (email available below). General contact details of provider: https://edirc.repec.org/data/ssbffea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.