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Remittances and Economic Growth: The Role of Financial Development

Author

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  • Unbreen Qayyum

    (Pakistan Institute of Development Economics, Islamabad)

  • Muhammad Nawaz

    (Pakistan Institute of Development Economics, Islamabad)

Abstract

Remittances and financial developments have been an important and overgrowing source in accelerating the growth process of many transitional economies. The economies that have enough source of remittance from their expatriate necessitate the well established technology for financial transactions that ultimately result in economic growth. This paper theoretically extends the Ramsey-Cass-Koopmans model by incorporating the remittances and financial developments that has emerged in financial sector. Theoretical results of steadystate indicate that higher amount of migrant remittances along with financial developments increase the consumption level of the domestic residents that results in higher economic growth by inducing more investment. In the long-run, both overseas remittances and financial developments increase the steady-state rate of output growth and capital stock. The findings also highlights that remittance creates the current account surplus and financial developments produce an upward shift in production function that lead to further growth. This research explores the new dimension for policy-maker particularly, working for innovations in the financial sectors.

Suggested Citation

  • Unbreen Qayyum & Muhammad Nawaz, 2014. "Remittances and Economic Growth: The Role of Financial Development," PIDE-Working Papers 2014:100, Pakistan Institute of Development Economics.
    • Handle: RePEc:pid:wpaper:2014:100
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    References listed on IDEAS

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    5. Arezki, Rabah & Brückner, Markus, 2012. "Rainfall, financial development, and remittances: Evidence from Sub-Saharan Africa," Journal of International Economics, Elsevier, vol. 87(2), pages 377-385.
    6. Hassan, M. Kabir & Sanchez, Benito & Yu, Jung-Suk, 2011. "Financial development and economic growth: New evidence from panel data," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(1), pages 88-104, February.
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    Cited by:

    1. Shujaat Abbas, 2016. "Remittances Flow to Pakistan: A Gravity Approach," Journal Transition Studies Review, Transition Academia Press, vol. 23(1), pages 97-106.

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    More about this item

    Keywords

    Financial Development; Remittances; Economic Growth;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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