Examining the relationship between remittances and financial development in Zimbabwe

Oscar Chiwira and Tinashe Murindagomo
Additional contact information
Oscar Chiwira: BA ISAGO University
Tinashe Murindagomo: BA ISAGO University

International Journal of Research in Business and Social Science (2147-4478), 2024, vol. 13, issue 10, 181-188

Abstract: This study examines the short-run and long-run relationships between remittances and economic growth in Zimbabwe from 1980 to 2022, using the autoregressive distributed lag (ARDL) bounds testing approach. To ensure the reliability, validity, and stability of the data, the study used the Jacque-Bera normality test, Breusch Godfrey serial LM test, and Bruesch-Pagan-Godfrey heteroskedasticity test together with a cumulative sum of recursive residuals and cumulative sum of recursive squares. The dependent variable in this study is domestic credit to the private sector as a percentage of GDP, and the independent personal remittances as a percentage of GDP, with the control variables per capita GDP growth, inflation, and gross fixed capital formation. The theoretical framework explores key perspectives, including the remittance-development optimist view, which posits that remittances can drive investment and economic progress; the supply-leading hypothesis, suggesting financial development as a precursor to economic growth; and the growth-led hypothesis, which sees economic development as a catalyst for financial development. The results from the ARDL test show no evidence of co-integration in the long run; however, in the short run, a significant positive effect on financial development is observed. This finding supported the complementarity theory and showed how remittances stimulate demand for financial services. Particularly problematic was the negative and statistically significant effect of inflation on financial development, which can potentially harm the performance of financial markets and slow down financial activities. The study suggests implementing targeted policies to limit parallel market activities and direct resources towards the formal sector. Key Words:Financial Development; Remittances; Co-Integration; ARDL; Zimbabwe.

Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ssbfnet.com/ojs/index.php/ijrbs/article/view/3697/2639 (application/pdf)
https://doi.org/10.20525/ijrbs.v13i10.3697 (text/html)

Related works:
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:rbs:ijbrss:v:13:y:2024:i:10:p:181-188

Access Statistics for this article

International Journal of Research in Business and Social Science (2147-4478) is currently edited by Prof.Dr.Umit Hacioglu

More articles in International Journal of Research in Business and Social Science (2147-4478) from Center for the Strategic Studies in Business and Finance Editorial Office,Baris Mah. Enver Adakan Cd. No: 5/8, Beylikduzu, Istanbul, Turkey. Contact information at EDIRC.
Bibliographic data for series maintained by Umit Hacioglu ().