Adenutsi, Deodat E. (2011): Financial development, international migrant remittances, and endogenous growth in Ghana. Published in: Studies in Economics and Finance , Vol. 68, No. 1 (2011): pp. 68-89.
Download (321kB) | Preview
Purpose: This paper seeks to provide further insights into understanding the finance-growth nexus by verifying the hypothesis that financial development promotes economic growth through its capacity to attract increased international migrant remittances to Ghana. Design/Methodology/Approach: A dynamic equilibrium-correction mechanism model for the period 1987(3)-2007(4) was estimated following the Johansen cointegration procedure. This approach produced maximum likelihood estimators of the unconstrained cointegrating vector, and suggested the number of cointegrating vectors without relying on an arbitrary normalization. Findings: The findings reveal two stylized facts with reference to Ghana. First, although financial development Granger-causes international migrant remittance inflows, it is in itself directly detrimental to endogenous growth. Second, international migrant remittance inflows are statistically significant in explaining variations in endogenous growth in the short run as well as in the long run. Practical Implications: Since directly, financial development hampers endogenous growth, but Granger-causes increased inflows of migrant remittances, and these remittances impact positively but marginally on endogenous growth, it follows that the sequencing of implementing Ghana’s financial reform programmes should be re-examined, whilst an enabling environment is created to induce Ghanaians living abroad to remit home through official channels. Originality/Value: International migrant remittances were found to be statistically significant in promoting endogenous growth, albeit marginally. Financial development does not directly engender growth, unless it succeeds in attracting non-debt foreign capital in the form of remittances through the formal sector. Financial development causes migrant remittance inflows which impact positively on growth.
|Item Type:||MPRA Paper|
|Original Title:||Financial development, international migrant remittances, and endogenous growth in Ghana|
|Keywords:||Financial Development; Economic Growth; International Migrant Remittances; Ghana|
|Subjects:||F - International Economics > F3 - International Finance
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
|Depositing User:||Deodat E. Adenutsi|
|Date Deposited:||04. Apr 2011 06:15|
|Last Modified:||12. Feb 2013 20:23|
Acosta, P.A., E.K.K. Lartey and F.S. Mandelman (2007), “Remittances and the Dutch Disease,” Working Paper. 2007-8. Atlanta, GA. http://www.frbatlanta.org/filelegacydocs/wp0708.pdf.
Adams, R.H. and J. Page (2005), “Do International Migration and Remittances Reduce Poverty in Developing Countries?” World Development, 33(10): 1645-1669.
Adenutsi, D.E. (2002), “Ghana: Financial Liberalisation, Bank Savings Mobilisation and Economic Performance,” Unpublished MPhil Thesis. Cape Coast: University of Cape Coast.
Agarwala, R. (1983), “Price Distortions and Growth in Developing Countries,” World Bank Staff Working Papers, 575. Washington D.C.: The World Bank.
Ahlburg, D. (1991), “Remittances and their Impact: A Study of Tonga and Western Samoa”, Pacific Policy Paper 7. Canberra: Australian National University.
Ahortor, C.R.K. and D.E. Adenutsi (2009), “The Impact of Remittances on Economic Growth in Small-Open Developing Countries,” Journal of Applied Sciences, 9(18): 3275-3286.
Bagehot, W. (1873), Lombard Street: A Description of the Money Market. London: John Murray.
Barro, R.J. (1990), “Government Spending in a Simple Model of Endogenous Growth,” Journal of Political Economy, 98: 103-125.
Barro, R.J. and X. Sala-i-Martin (1992), “Public Finance in Models of Economic Growth,” Review of Economic Studies, 54: 646-661.
Bencivenga, V.R., B.D. Smith, and R.M. Starr (1995), “Transactions Costs, Technological Choice, and Endogenous Growth,” Journal of Economic Theory, 67: 153-177.
Boone, P. (1994), “The Impact of Foreign Aid on Savings and Growth,” Centre of Economic Performance Working Paper 677. London: London School of Economics.
Buffie, E.F. (1984), “Financial Repression, the New Structuralists, and Stabilisation Policy in Semi-Industrialised Economies,” Journal of Development Economics, 14(3): 305-322.
Cameron, R. (1967), Banking in the Early Stages of Industrialisation. New York: Oxford University Press.
Chami, R., C. Fullenkamp and S. Jahjah (2005), “Are Immigrant Remittance Flows a Source of Capital for Development?” IMF Staff Papers, 52: 55-81.
Chenery, H.B. and A.M. Strout (1966), “Foreign Assistance and Economic Development,” American Economic Review, 56 (September): 679-733.
Chimhowu, A., J. Piesse and C. Pinder, (2004), “The Impact of Remittances,” Enterprise Development Impact Assessment Information Service, Issue 29, April 2004.
de Haas, H. (2003), “Migration and Development in Southern Morocco: The Disparate Socioeconomic Impacts in the Todgha Oasis Valley”, Unpublished PhD Thesis. Nijmegen: University of Nijmegen.
Faini, Riccardo (2002), “Migration, Remittances, and Growth,” www.wider.unu.edu/conference/conference-2002-3conference%20papers/faini.pdf.
Fayissa, B. and M. El-Kaissy (1999), “Foreign Aid and the Economic Growth of Developing Countries (LDCs): Further Evidence,” Studies in Comparative International Development, 37, (September): 37-50.
Gaynor, P.E. and R.C. Kirkpatrick (1994), Introduction to Time-Series Modelling and Forecasting in Business and Economics, New York: McGraw-Hill.
Gibson, H.D. and E. Tsakalotos (1994), “The Scope and Limits of Financial Liberalisation in Developing Countries: A Critical Survey,” The Journal of Development Studies, 30 (3): 578-628.
Giuliano, P. and M. Ruiz-Arranz (2005), “Remittances, Financial Development, and Growth,” IMF Working Paper 05/234. Washington D.C.: International Monetary Fund.
Glytsos, N.P. (2002), “The Role of Migrant Remittances in Development: Evidence from Mediterranean Countries,” International Migration, 40(1): 5-26.
Goldsmith, R.W. (1969), Financial Structure and Development, New Heaven: Yale University Press.
Granger, C.W.J. and P. Newbold (1974), “Spurious Regression in Econometrics,” Journal of Applied Econometrics, 2: 11-20. Harris, R.I.D. (1995), Using Cointegration Analysis in Econometric Modelling, Harlow: Prentice Hall.
Heller, P.S. (1975), “A Model of Public Fiscal Behaviour in Developing Countries: Aid, Investment and Taxation,” American Economic Review, 65: 429-445.
IMF (International Monetary Fund) (2005), World Economic Outlook, April 2005. Washington D.C.: International Monetary Fund.
Islam, M.A. (1992), “Foreign Aid and Economic Growth: An Econometric Study of Bangladesh,” Applied Economics, 24: 541-544.
Johansen, S. and K. Juselius (1990), “Maximum Likelihood Estimation and Inference on Cointegration with Application to the Demand for Money,” Oxford Bulletin of Economics and Statistics, 52(May): 169-210.
Jongwanich, J. (2007), “Workers’ Remittances, Economic Growth and Poverty in Developing Asian and Pacific Countries,” UNESCAP Working Paper WP/07/01.
Khan, M.S. and A.S. Senhadji (2000), “Financial Development and Economic Growth: An Overview,” Working Paper 00/209. Washington, D.C.: International Monetary Fund.
Khatkhate, D.R. (1988), “Assessing the Impact of Interest Rates in Less Developed Countries,” World Development, 16: 577-588.
King, R.G. and R. Levine (1993), “Finance and Growth: Schumpeter Might Be Right,” Quarterly Journal of Economics, 108: 717-737.
Kohsaka, A. (1984), “The High Interest Rate Policy under Financial Repression,” Developing Economies, 22(4): 419-452.
Leon-Ledesma, M.C. and M. Piracha (2004), “International Migration and the Role of Remittances in Eastern Europe,” International Migration, 42(4); 65-83.
Levine, R. (1997), “Financial Development and Economic Growth: Views and Agenda,” Journal of Economic Literature, 35: 688-726.
Levine, R. and D. Renelt (1992), “A Sensitivity Analysis of Cross-Country Growth Regressions,” American Economic Revenue, 82 (September): 942-963.
Levine, R. and S. Zervos (1998), “Stock Markets, Banks and Economic Growth,” American Economic Review, 88: 537-558.
Levy, V. (1987), “Aid and Economic Growth in the Sub-Saharan Africa: The Recent Experience,” European Economic Revenue, 32: 1777-1795.
Lipton, M. (1980), “Migration from the Rural Areas of Poor Countries: The Impact on Rural Productivity and Income Distribution”, World Development, 8(1): 1-24.
Lucas, R.E. (1988), “On Mechanics of Economic Growth,” Journal of Monetary Economics, 22 (July): 3-42.
Lucas, R.E. (2005), “International Migration and Economic Development,” Stockholm: Expert Group on Development Issues, Swedish Ministry for Foreign Affairs.
MacKinnon, J.G., A.A. Haug and L. Michelis (1999), “Numerical Distribution Functions of Livelihood Ratio Tests for Cointegration,” Journal of Applied Econometrics, 14(5): 563-577.
Massey, D.S., J. Arango, G. Hugo, A. Kounaouci, A. Pellegrino, and J.E. Taylor (1998), World in Motion; Understanding International Migration at the End of the Millennium. Oxford, Clarendon Press.
McKinnon, R.I. (1973), Money and Capital in Economic Development, Washington D.C.: Brookings Institution.
Mundaca, G.B. (2005),”Can Remittances enhance Economic Growth? The Role of Financial Markets Development,” Mimeo, Department of Economics, University of Oslo.
Ndebbio, J.E.U. (2004), “Financial Deepening, Economic Growth and Development: Evidence from Selected Sub-Saharan African Countries,” AERC Research Paper 142. Nairobi: African Economic Research Consortium.
Obstfeld, M. (1994), “Risk, Diversification, and Growth,” The American Economic Review, 84(5): 1310-1329.
Ogaki, M., J.D. Ostry and C.M. Reinhart (1996), “Saving Behaviour in Low- and Medium-Income Developing Countries,” IMF Staff Paper, 43(1): 38-71.
Papanek G. (1973), “Aid, Foreign Private Investment, Savings and Growth in Less Developed Countries,” The Journal of Political Economy, 81: 121-130.
Phillips, P.C.B. and P. Perron (1988), “Testing for a Unit Root in Time Series Regression”, Biometrika, 75: 335-46.
Romer, P.M. (1986), “Increasing Returns and Long-Run Growth,” Journal of Political Economy, 94, 1002-1037.
Romer, P.M. (1990), “Endogenous Technological Change,” Journal of Political Economy, 98: S71-S102.
Rubenstein, H. (1992) Migration, Development and Remittances in Rural Mexico. International Migration, 30(2), 1992.
Schumpeter, J.A. (1912), The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and Business Cycle. Cambridge: Harvard University Press.
Shaw, E.S. (1973), Financial Deepening in Economic Development, New York: Oxford University Press.
Solimano, A. (2003), “Remittances by Emigrants: Issues and Evidence,” WIDER Research Paper 2003/89, Helsinki: World Institute for Development Economics Research.
Stahl, C.W. and F. Arnold (1986), “Overseas Workers’ Remittances in Asian Development”, International Migration Review, 20 (4): 899-925.
Stark, O. and D. Levhari (1982), “On Migration and Risk in Less Developed Countries”, Economic Development and Cultural Change, 31(1): 191-196.
Taylor, E. (1984), “Egyptian Migration and Peasant Wives”, Merip Reports, 124, 3-10.
Taylor, L. (1983), Structuralist Macroeconomics: Application Models for the Third World. New York: Basic Books.
Toxopeus, H.S. and R. Lensink (2006), “Remittances and Financial Inclusion in Development,” UNU-WIDER Working Paper. World Institute for Development Economic Research.
van Wijnbergen, S. (1983), “Credit Policy, Inflation and Growth in Financially Repressed Economy,” Journal of Development Economics, 13: 45-65.
World Bank (2003), Global Development Finance. Washington D.C.: World Bank.
World Bank (2006), Global Economic Prospects: Economic Implications and Migration. Washington, D.C.: World Bank.