Financial Development Thresholds and the Remittances-Growth Nexus
Chrysost Bangake  1@  
1 : Lille - Economie et Management  (LEM)  -  Site web
Université Catholique de Lille, Université de Lille, Centre National de la Recherche Scientifique

This study provides new evidence on the relationships between remittances and economic growth using Panel Threshold Regression (PTR) model proposed by Hansen (1999) that authorized multiple thresholds. The sample consists of 76 developing countries from 1975-2013. The empirical results indicate that there is a threshold effect of financial development in the remittances-growth relationship. In particular, remittances promote economic growth in recipient countries whose financial sector functions relatively well; beyond the threshold level further development of finance tends to adversely affect the remittance-growth nexus. Our results remain robust when we control for potential endogeneity bias using GMM approach. The findings reveal that more finance is not necessarily good for economic growth in the recipient countries. They highlight that an “optimal” level of financial development is more crucial in the remittance-growth nexus.

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