Addressing the effect of workers’ remittance on economic growth: evidence from MENA countries

Hajer Kratou and Kaouthar Gazdar

International Journal of Social Economics, 2015, vol. 43, issue 1, 51-70

Abstract: Purpose - – The purpose of this paper is to study the effect of remittances on economic growth in MENA region. More precisely this study tries first to explore the short-run and the long-run relationship between remittances and economic growth. Second, the authors address how the local financial development and institutional environment influence a country’s capacity to take advantage from remittances. Design/methodology/approach - – The panel data unit-root test as well as the panel data co-integration is used for the purpose of the long-run remittances growth relationship and the IV technique with GMM option is adopted to study the short-run link. Findings - – This paper provides empirical evidence that remittances have a positive effect on economic growth in the long run and a negative effect in short run. The short-run effect of remittances on economic growth is conditional. In fact, it depends in the levels of financial development and institutional quality, respectively. Practical implications - – As practical implications, policy interventions, to improve the functioning of governance institutions, enforcing regulation and political stability, enhancing financial system and socio-economic environment are also crucial for increasing the benefit effects of remittances. Originality/value - – The research is an extension of previous evidence in two ways; the authors have examined the long-run and short-run remittances-growth relationship in the first time. In the second time, the authors have explored the conditional remittances-growth relationship in MENA countries. Specifically, the authors have examined whether the remittances-growth nexus is affected by financial development and institutional quality levels in MENA countries.

Keywords: Institutions and institutional analysis; Economic growth; Financial development; Remittances (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijsepp:v:43:y:2015:i:1:p:51-70

DOI: 10.1108/IJSE-08-2013-0189

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