EconPapers    
Economics at your fingertips  
 

Revisiting the Effects of Remittances on Bank Credit: A Macro Perspective

Richard Brown () and Fabrizio Carmignani ()

Scottish Journal of Political Economy, 2015, vol. 62, issue 5, 454-485

Abstract: type="main" xml:id="sjpe12086-abs-0001"> We investigate the effect of remittances on bank credit in developing countries. Understanding this link is important in view of the growing relevance of remittances as a source of external finance and of the beneficial impact that financial intermediation is likely to have on economic growth. Our contribution is twofold. First, we present a theoretical model of bank credit in a hypothetical remittances-receiving country where: (1) the banking sector is imperfectly competitive; and (2) bank rates change infrequently because of the presence of adjustment costs. We show that in equilibrium, the relationship between remittances and bank-credit is likely to be non-linear. Second, we look at the evidence using a panel data set for a large group of developing and emerging economies over the period 1970–2009. We find that at initially low levels of remittances, an increase in remittances reduces the volume of credit extended by banks. However, at sufficiently high levels of remittances, the effect becomes positive. The turning point of the relationship occurs at a level of remittances of about 2.5% of GDP, which would imply that approximately 50% of our sample lies to each side of this threshold.

Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1111/sjpe.2015.62.issue-5 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Revisiting the effects of remittances on bank credit: a macro perspective (2012) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:scotjp:v:62:y:2015:i:5:p:454-485

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0036-9292

Access Statistics for this article

Scottish Journal of Political Economy is currently edited by Tim Barmby, Andrew Hughes-Hallett and Campbell Leith

More articles in Scottish Journal of Political Economy from Scottish Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2020-08-27
Handle: RePEc:bla:scotjp:v:62:y:2015:i:5:p:454-485