Remittances, Financial Development, and Growth

By Paola Giuliano, Marta Ruiz-Arranz. Social Science Research Network, 2005

1,497 citations recorded by the source corpus.

Despite the increasing importance of remittances in total international capital flows, the relationship between remittances and growth has not been adequately studied. This paper studies one of the links between remittances and growth, in particular how local financial sector development influences a country's capacity to take advantage of remittances. Using a newly-constructed dataset for remittances covering about 100 developing countries, we find that remittances boost growth in countries with less developed financial systems by providing an alternative way to finance investment and helping overcome liquidity constraints. This finding controls for the endogeneity of remittances and financial development, does not depend on the particular measure of financial sector development used, and is robust to a number of robustness tests, including threshold estimation. We also provide evidence that there could be an investment channel trough which remittances can promote growth especially when the financial sector does not meet the credit needs of the population.

Subfields: Economics and Econometrics, Information Systems, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/a261c0e5d16c23ea8d75438aba8e21fa20635592

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Citations in the corpus

The impact of financial development on carbon emissions: An empirical analysis in China (2011, methodology): “…related with the activities of enterprises, the ratio of the bank loans to GDP may be more reasonable, which in fact has been commonly used in some previous financial development literature for other research purposes (Giuliano and Ruiz-Arranz, 2009; Hasan et al., 2009; Yuxiang and Chen, in press).”
Remittances and Household Consumption Instability in Developing Countries (2011, background): “Remittances might also act as a substitute for the low level of financial development: the marginal benefit of remittances received by households, increases with the low level of financial development (Giuliano and Ruiz-Arranz, 2009).”
Impact of Remittances on Poverty and Financial Development in Sub-Saharan Africa (2007, background): “However studies that link remittances to investment, where remittances either substitute for or improve financial access, tend to conclude that remittances stimulate growth (Giuliano and Ruiz-Arranz, 2005; Toxopeus and Lensink, 2006).”
Beware of Emigrants Bearing Gifts: Optimal Fiscal and Monetary Policy in the Presence of Remittances (2006, result): “…to match data on mean worker remittances in percent of GDP for remittance-dependent economies as presented in Figure 1, and in other recent studies examining remittance flows such as World Bank (2006), Chami, Fullenkamp, and Jahjah (2003, 2005), Giuliano and Ruiz-Arranz (2005), and IMF (2005b).”
Remittances and Financial Inclusion : Evidence from El Salvador (2011, neutral): “Gupta et al. (2009) use a similar methodology as Aggarwal et al.”
Remittances and the Use of Formal and Informal Financial Services (2016, background): “Along a similar line of argument, Giuliano and Ruiz-Arranz (2009) find a larger impact on growth in countries with low levels of financial development because—as they argue—remittances can substitute for the lack of access to credit and enable households and enterprises to increase their investment…”
Do remittances improve income inequality? An instrumental variable quantile analysis of the Kenyan case (2016, background): “, 2014particularly by stimulating financial development (Giuliano and Ruiz-Arranz, 2009; Mundaca, 2009; Aggarwal et al. 2011; Chowdhury, 2011)(2); enhancing human capital formation by increasing educational expenditure at the household level (Yang, 2008; Adams and Cuecuecha, 2010); and increasing th”
Remittances, schooling, and child labor in Mexico (2012, background): “Giuliano and Ruiz-Arranz (2009), in an empirical study for 100 countries, found evidence that remittances are an alternative means to finance investment and help overcoming liquidity constraints.”
Remittances and financial development in Sub-Saharan African countries: A system approach (2015, background): “Considering also a homogeneous panel model on annual data from 100 developing countries for the 1975–2002 period, Giuliano and Ruiz-Arranz (2009) find results confirming their idea that remittances are more growth-enhancing in”
Remittances, financial development and economic growth in Africa (2012, background): “…sources of financial flows to developing countries, often overshadowing the traditional sources such as official aid and private capital flows (see World Bank, 2003, 2004; Aggarwal, Demirgüç -Kunt, & Martínez Pería, 2010; Giulia & Zazzaro, 2011; Giuliano & Ruiz-Arranz, 2009; Rao & Hassan, 2011).”