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Finance, Institutions, Remittances and Economic growth: New Evidence from a Dynamic Panel Threshold Analysis

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  • Afi Etonam Adetou
  • Komlan Fiodendji

Abstract

This paper empirically examines how the local financial development and institutions influence a country’s capacity to take advantage from remittances over the period 1985-2014. We use a dynamic panel threshold model (see Hansen, 1999 and Caner and Hansen, 2004) to estimate remittances thresholds for long-term economic growth. The evidence strongly suggests that the impact of remittances on economic growth depends on the level of financial development and the institutional environment. More precisely, a strong institutional environment is sine qua non for the effective contribution of remittance to sustainable growth in ECOWAS countries. One of main contributions of this paper is to successfully identify the conditions under which the remittance has a positive impact on economic growth. This is crucial for governments in the ECOWAS area to improve institutional quality and the support they provide for the financial system, in their economies should therefore be a main priority for policy makers as there are gains to be made in terms of economic development. The results seem to indicate the design of policies that would facilitate simultaneous improvements in institutions indicators and financial development indicators. JEL classification numbers: F24, O16, O15, P24Keywords: Remittances, Economic growth, Dynamic panel threshold model, Institutions quality, Financial development.

Suggested Citation

  • Afi Etonam Adetou & Komlan Fiodendji, 2019. "Finance, Institutions, Remittances and Economic growth: New Evidence from a Dynamic Panel Threshold Analysis," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 9(2), pages 1-4.
    • Handle: RePEc:spt:apfiba:v:9:y:2019:i:2:f:9_2_4
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    2. Ngozi E. Egbuna (PhD) & Maimuna John-Sowe & Dauda Mohammed (PhD) & Hissan Abubakari & Eric L. Sambolah & Kormay Adams, 2020. "Uncertainty And Economic Performance In The West African Monetary Zone (Wamz): A Fixed Effect Panel Threshold Approach," Working Papers 19, West African Monetary Institute.

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    More about this item

    Keywords

    remittances; economic growth; dynamic panel threshold model; institutions quality; financial development.;
    All these keywords.

    JEL classification:

    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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