THE MEDIATING ROLE OF INSTITUTIONS IN THE REMITTANCE–GROWTH RELATIONSHIP: EVIDENCE FROM NIGERIA

Ibrahim Ayoade Adekunle, Tolulope Oyakhilome Williams, Olatunde Julius Omokanmi and Serifat Olukorede Onayemi

Economic Annals, 2020, vol. 65, issue 227, 7 - 30

Abstract: This study examines the mediating role of institutions in the remit-tance–growth relationship in Nigeria. We use autoregressive distributed lag (ARDL) estimation to establish the interaction of the variables of interest. The short-run re-sults reveal that remittance inflows posi-tively influence growth, probably due to the immediate injection of financial resources that an increase in remittances brings about. This effect is reinforced by improve-ments in regulatory quality. In contrast the long-run results reveal that, over time, re-mittance inflows are negatively related to growth probably due to adverse macroeco-nomic consequences, to a decrease in work incentives, and a decline in the motivation for technological innovation. However, the adoption of improved institutional en-vironment is found to offset the negative long-run effect of remittances on growth, at least to some extent. Therefore, remittance-receiving countries should improve the de-sign and enforcement of laws, regulatory quality, and control over corruption, so that they can make best use of remittance inflows and other sources of external fi-nancing needed to augment domestic pro-ductivity and growth.

Keywords: economic growth; remit-tances; institutions; ARDL; Nigeria (search for similar items in EconPapers)
JEL-codes: E01 E44 F24 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (8)

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