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Do remittance fl ows promote financial inclusion?

Immaculate Machasio ()
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Immaculate Machasio: University of Giessen

MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: In this paper, we evaluate whether remittances promote financial inclusion in developing countries. We construct an index of financial inclusion and present single equation estimates of the effects of remittances on financial inclusion. The paper uses data on remittance fl ows to 61 developing countries from different regions around the world spanning from 1990-2014 to explore this nexus. The study uses fixed effects estimations as well as GMM IV estimation method of panel data econometric analysis. The regression results confirm the hypothesis that remittances have an impact on financial inclusion through their effect on financial sector development. This can be intuitively explained by the fact that sending and receiving remittances increase senders and recipients use of financial services. The study shows that indeed remittances increase financial inclusion by about 2.49%. Remittances can therefore be considered a catalyst of financial inclusion in development.

Keywords: Remittances; Financial inclusion; Instrumental variables (search for similar items in EconPapers)
JEL-codes: C23 F34 H63 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2018
New Economics Papers: this item is included in nep-dev, nep-fdg and nep-fle
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:201826

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