Financial development, international migrant remittances, and endogenous growth in Ghana

Deodat Adenutsi

MPRA Paper from University Library of Munich, Germany

Abstract: Purpose: This paper seeks to provide further insights into understanding the finance-growth nexus by verifying the hypothesis that financial development promotes economic growth through its capacity to attract increased international migrant remittances to Ghana. Design/Methodology/Approach: A dynamic equilibrium-correction mechanism model for the period 1987(3)-2007(4) was estimated following the Johansen cointegration procedure. This approach produced maximum likelihood estimators of the unconstrained cointegrating vector, and suggested the number of cointegrating vectors without relying on an arbitrary normalization. Findings: The findings reveal two stylized facts with reference to Ghana. First, although financial development Granger-causes international migrant remittance inflows, it is in itself directly detrimental to endogenous growth. Second, international migrant remittance inflows are statistically significant in explaining variations in endogenous growth in the short run as well as in the long run. Practical Implications: Since directly, financial development hampers endogenous growth, but Granger-causes increased inflows of migrant remittances, and these remittances impact positively but marginally on endogenous growth, it follows that the sequencing of implementing Ghana’s financial reform programmes should be re-examined, whilst an enabling environment is created to induce Ghanaians living abroad to remit home through official channels. Originality/Value: International migrant remittances were found to be statistically significant in promoting endogenous growth, albeit marginally. Financial development does not directly engender growth, unless it succeeds in attracting non-debt foreign capital in the form of remittances through the formal sector. Financial development causes migrant remittance inflows which impact positively on growth.

Keywords: Financial Development; Economic Growth; International Migrant Remittances; Ghana (search for similar items in EconPapers)
JEL-codes: F3 O16 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-afr, nep-fdg and nep-mig
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Published in Studies in Economics and Finance 1.68(2011): pp. 68-89

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Journal Article: Financial development, international migrant remittances and endogenous growth in Ghana (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:29330

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