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Harnessing remittances through formal channels for development in sub-saharan Africa

Francis M. Kemegue, Emmanuel Owusu-Sekyere () and Renee van Eyden ()

Journal of Developing Areas, 2014, vol. 48, issue 3, 321-337

Abstract: This paper investigates how sub-Saharan African (SSA) countries could harness remittances through formal channels for development using annual data for 35 countries from 1980 to 2008.We control for country heterogeneity, endogeneity and cross-sectional dependence of the error term using the least square dummy variable (LSDV) estimator with Driscoll and Kraay (1998) corrected standard errors, the Kiviet (1995) bias-corrected LSDV estimator and feasible generalized least squares (FGLS) by Parks (1967) and Kmenta (1986). We find that financial deepening in the home country is critical to the use of formal channels and the ability of sub-Saharan African countries to harness remittances for development. Besides remitting home for altruistic reasons, sub-Saharan African migrants would also respond to investment opportunities in their home countries, contingent on a stable exchange rate. Sub-Saharan African migrants also remit more money home when their incomes increase in the host country.

Keywords: Migration; Remittances; Sub-Saharan Africa (search for similar items in EconPapers)
JEL-codes: F22 F24 O55 (search for similar items in EconPapers)
Date: 2014
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Handle: RePEc:jda:journl:vol.48:year:2014:issue3:pp:321-337