Munich Personal RePEc Archive

Migrant Workers’ Remittances and Economic Growth: The Role of Financial Development

Aziz, M. Nusrate and Sen, Somnath and Sun, Puyang and Wu, Lichao (2015): Migrant Workers’ Remittances and Economic Growth: The Role of Financial Development.

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Abstract

Although the growing importance of workers’ remittance in international capital flow is indubitable, it is apparent that some countries can take full advantage from this cash flow while the others cannot attain any significant benefit from it. Financial development, which may facilitate the conversion of workers’ remittance into a productive investment and thereby economic growth, can be considered to be one of the influential factors. However, there is no consensus in existing literature about the impact of workers’ remittance on economic growth in the presence of financial development. This study therefore examines whether financial development catalyses the transmission channel from workers’ remittance to economic growth. The system GMM and the fixed effects estimators are used for panel data analysis. Our analysis indicates that methods matter in studying the effect of workers’ remittance and financial development on growth. Estimates based on system GMM indicate that the workers’ remittance through financial development significantly accelerate economic growth. We also find that in the face of financial liberalization and trade openness the workers’ remittance significantly fosters economic growth.

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