Output growth volatility, remittances and institutions
International Journal of Development Issues
ISSN: 1446-8956
Article publication date: 7 September 2015
Abstract
Purpose
The purpose of this paper is to empirically examine the role of institutions on the remittances–output growth volatility relationship.
Design/methodology/approach
The data set of this paper is limited to 71 remittances recipient countries. In an attempt to deal with endogeneity issues, the paper adopts the use of system generalised method of moment (GMM).
Findings
First, in consonance with earlier studies, the growth volatility reducing influence of remittances flows was established. Second, unlike the extant literature, the growth volatility reduction potential of remittances was found to be more pronounced in the presence of well-functioning institutions. Finally, the interaction of remittances with our six institutional quality measures showed that growth volatility reduced considerably with better institutions.
Practical implications
In terms of policy, remittances recipient countries need to simultaneously pursue economic and governance reforms. Both of these will enhance the counter-cyclicality of remittances and possibly other capital flows.
Originality/value
Substantial efforts have been devoted to investigating the impact of remittances on output growth volatility, while very little research attention has been devoted to analysing the impact of institutions on the remittances–output growth volatility nexus.
Keywords
Citation
Ajide, K.B., Raheem, I.D. and Adeniyi, O. (2015), "Output growth volatility, remittances and institutions", International Journal of Development Issues, Vol. 14 No. 3, pp. 190-203. https://doi.org/10.1108/IJDI-06-2015-0039
Publisher
:Emerald Group Publishing Limited
Copyright © 2015, Emerald Group Publishing Limited