THE IMPACT OF REMITTANCES ON ECONOMIC GROWTH: EVIDENCE FROM THE 10 MOST REMITTANCE-RECEIVING FOR THE MENA COUNTRIES

Wafa Issa () and Najeh Bouchoucha
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Wafa Issa: Faculty of Economics and Management of Sousse, University of Sousse, Sousse, Tunisia
Najeh Bouchoucha: Faculty of Economics and Management of Sousse, University of Sousse, Sousse, Tunisia

Global Economy Journal (GEJ), 2025, vol. 25, issue 01n02, 1-24

Abstract: This paper investigates the impact of remittances on economic growth for the ten MENA countries for the MENA region over a period from 1980 to 2021. Our contribution consists in decomposing the effect of remittances on economic growth into a direct effect and an indirect effect which are transmitted through the domestic investment channel and human capital channel. To do so, our econometric approach is based on dynamic panel data (GMM diff and GMM sys) in order to overcome endogeneity and inverse causality bias. Two main results can be identified: First, the results show that remittances negatively affect economic growth. Second, we show that the interaction terms between remittances and human capital (Rem∗enrol) and remittances and domestic investment (Rem∗inv) are positive and statistically significant in the dynamic panel approach. These results show that the effectiveness of migrant remittances in terms of economic growth depends heavily on improving human capital and orienting remittances to the most productive investments for MENA countries. The policy implications of our study are that governments of the most remittance-receiving countries in the MENA region must give great importance to improving domestic investment and the level of human capital in order to enhance remittances and promoting economic growth.

Keywords: Remittances; economic growth; domestic investment; human capital; GMM system; GMM difference; MENA region; economic development; migration (search for similar items in EconPapers)
JEL-codes: C33 F24 O47 O52 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1142/S2194565924500076

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