Do countries’ interdependence, asymmetry, and policy variances matter in the remittance-poverty causal nexus?

Clement Olaniyi and Nicholas Odhiambo

The Journal of International Trade & Economic Development, 2024, vol. 33, issue 8, 1652-1690

Abstract: This study departs from earlier studies by incorporating nonlinearities, asymmetric structures, cross-sectional dependence, and policy variations across countries into the remittance-poverty causal nexus. Due to the high incidence of extreme poverty in sub-Saharan Africa (SSA) despite the persistent remittance inflows to the region, data on SSA for the periods 1981–2020 are analyzed using the Hatemi-J data decomposition procedure, a battery of second-generation estimators, and Dumitrescu-Hurlin heterogeneous panel Granger non-causality test. The findings, unlike prior studies, confirm the existence of cross-sectional dependence, as well as the need for policy diversity among SSA countries. The research outcomes also differ from previous research in that they reveal multiple features of asymmetries in the causality between remittances and poverty reduction which vary across SSA countries. Policy differences among SSA nations to address country-specific peculiarities are attested by symmetric causality. In certain countries, remittance inflows are stimulating factors that induce poverty reduction, whereas, in others, the high incidence of extreme poverty is a causal agent that pushes Africans in the diaspora to send money home to help alleviate poverty. Only a few instances of bidirectional causality have been established. Evidence of no causality is found to exist in some countries. The outcomes of nonlinear and asymmetric causalities are more diverse. All of the pairs of positive and negative components show strong evidence of asymmetric causality, which varies across SSA countries with more informative and robust policy dimensions. The imperative policy implications of the research outputs for poverty reduction are drawn and discussed.

Date: 2024
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DOI: 10.1080/09638199.2023.2288191

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