Dynamics of the remittances: Fnancial development nexus in Sub Saharan Africa (SSA)

Strike Mbulawa, Samuel Chingoiro and Robert Machera
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Strike Mbulawa: Head of Department, Accounting & Finance, Faculty of Business & Accounting, Botho University, Botho Education Park, Kgale, Gaborone, Botswana
Samuel Chingoiro: Faculty of Business & Accounting, Botho University, Botho Education Park, Kgale, Gaborone, Botswana
Robert Machera: Faculty of Business & Accounting, Botho University, Botho Education Park, Kgale, Gaborone, Botswana

International Journal of Research in Business and Social Science (2147-4478), 2022, vol. 11, issue 4, 171-182

Abstract: This paper explores the inter-connectedness of remittances and financial development and how their associated covariates such as savings, investment, money supply and economic growth are impacted by this relationship. The study employs a panel vector autoregression (P-VAR) estimation technique, and the generalized methods of moments (GMM) are applied after removing fixed effects and lagged regressors are used as instruments to have consistent estimators. The main findings of the study demonstrate that (i) remittances and financial development have a feedback interrelationship, and some interlinkages are identified amongst their covariates, (ii) economic growth has a dual connection with financial development and that (iii) savings, investment, and broad money supply influence both financial development and remittances. These findings contribute to current discussions in the literature as they support the importance of deepening financial markets in SSA, and attracting more remittances. The significant role played by the diaspora in improving domestic financial depth is confirmed. Progression in SSA economic growth helps to stimulate those in the diaspora to repatriate most of their earnings back home. Key Words:Remittances, Financial Development, Sub Saharan Africa, Panel Vector autoregression

Date: 2022
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Citations: View citations in EconPapers (2)

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