Addressing the effect of workers’ remittance on economic growth: evidence from MENA countries
International Journal of Social Economics
ISSN: 0306-8293
Article publication date: 31 December 2015
Abstract
Purpose
The purpose of this paper is to study the effect of remittances on economic growth in MENA region. More precisely this study tries first to explore the short-run and the long-run relationship between remittances and economic growth. Second, the authors address how the local financial development and institutional environment influence a country’s capacity to take advantage from remittances.
Design/methodology/approach
The panel data unit-root test as well as the panel data co-integration is used for the purpose of the long-run remittances growth relationship and the IV technique with GMM option is adopted to study the short-run link.
Findings
This paper provides empirical evidence that remittances have a positive effect on economic growth in the long run and a negative effect in short run. The short-run effect of remittances on economic growth is conditional. In fact, it depends in the levels of financial development and institutional quality, respectively.
Practical implications
As practical implications, policy interventions, to improve the functioning of governance institutions, enforcing regulation and political stability, enhancing financial system and socio-economic environment are also crucial for increasing the benefit effects of remittances.
Originality/value
The research is an extension of previous evidence in two ways; the authors have examined the long-run and short-run remittances-growth relationship in the first time. In the second time, the authors have explored the conditional remittances-growth relationship in MENA countries. Specifically, the authors have examined whether the remittances-growth nexus is affected by financial development and institutional quality levels in MENA countries.
Keywords
Citation
Kratou, H. and Gazdar, K. (2015), "Addressing the effect of workers’ remittance on economic growth: evidence from MENA countries", International Journal of Social Economics, Vol. 43 No. 1, pp. 51-70. https://doi.org/10.1108/IJSE-08-2013-0189
Publisher
:Emerald Group Publishing Limited
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