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Remittances and Financial Development in Africa

Author

Listed:
  • Ibrahim A. Adekunle

    (Olabisi Onabanjo University, Ago-Iwoye, Nigeria)

  • Sheriffdeen A. Tella

    (Olabisi Onabanjo University, Ago-Iwoye, Nigeria)

  • Kolawole Subair

    (Yobe State University, Damaturu, Nigeria)

  • Soliu B. Adegboyega

    (Olabisi Onabanjo University, Ogun State, Nigeria)

Abstract
Despite the magnitude of remittances as an alternative source of investment financing in Africa, the financial sector in Africa has significantly remained underdeveloped and unstable. Finding a solution to Africa's financial deregulation problems has proved tenacious partly because of inadequate literature that explain the nature of Africa capital and financial markets which has shown to be unorganised, spatially fragmented, highly segmented and invariably externally dependent. We examine the structural linkages between remittances and financial sector development in Africa. Panel data on indices of remittances was regressed on indices of financial sector development in fifty-three (53) African countries from 1986 through 2017 using the Pooled Mean Group (PMG) estimation procedure. We accounted for cross-sectional dependence inherent in ordinary panel estimation and found a basis for the strict orthogonal relationship among the variables. Findings revealed a positive long-run relationship between remittances and financial development with a significant (positive) short-run relationship. It is suggested that, while attracting migrants' transfers which can have significant short-run poverty-alleviating advantages, in the long run, it might be more beneficial for African governments to foster financial sector development using alternative financial development strategies.

Suggested Citation

  • Ibrahim A. Adekunle & Sheriffdeen A. Tella & Kolawole Subair & Soliu B. Adegboyega, 2020. "Remittances and Financial Development in Africa," Working Papers 20/081, European Xtramile Centre of African Studies (EXCAS).
    • Handle: RePEc:exs:wpaper:20/081
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    References listed on IDEAS

    as
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    Cited by:

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    More about this item

    Keywords

    Remittance; Financial Development; Pooled Mean Group; Africa;
    All these keywords.

    JEL classification:

    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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