This paper is about the effect of international remittances of economic growth in sub-Saharan Africa.
For many developing economies, remittances constitute the single largest source of foreign exchange, exceeding export revenues, foreign direct investment (FDI), and other private capital inflows.
This study aims to examine the effect of international remittances on economic growth in SSA countries using a panel data approach. The System Generalized Method of Moments was used as the main model of analysis. The sample consists of 29 SSA countries for the period 2004-2019.
The study findings show that international remittance has a positive and significant effect on economic growth in SSA. The study recommends that SSA countries should be designing policies and strategies that facilitate less costly and hassle-free flow of remittances into national development. There is a need to have well-established institutional frameworks to train, support, and ensure the welfare of emigrants abroad by the provision of information or services to assist migrant welfare and promote remittances and investment in the home country.
Table of Contents
1. INTRODUCTION
1.1 Background of the Study
1.2 Problem Statement
1.3 Research questions
1.4 Hypothesis
1.5 Objectives:
1.6 Significance of the Study
1.7 Scope of the Study
1.8 Limitation of the Study
1.9 Organization of the Research Report
2. LITERATURE REVIEW
2.1 Definitions of Remittance
2.2 Theories of Remittance
2.2.1 Developmental Pessimistic Structuralism Theory
2.2.2 Developmental-Remittance Pluralist Theory-Optimistic view
2.2.3 Theories of Motives for a Migrant to Remit
2.3 Economic Growth Theories
2.3.1 The Harrod-Domar Model
2.3.2 The Solow Model
2.3.3 The Endogenous Growth Model
2.4 Empirical Literature
2.4.1 Economic Growth effects of remittances
2.4.2 Economic growth effects of control Variables
2.5 Conceptual Framework
3. RESEARCH METHODOLOGY
3.1 Data type and source
3.2 Methods of Data Analysis
3.3 Model Specification
3.4 Definition of variables and Priori Expectations
3.5. Diagnostic Tests
4. RESULT AND DISCUSSIONS
4.1Descriptive Analysis
4.2 Econometrics Analysis
4.2.1 Diagnostic tests Results
4.2.2 Dynamic Panel Analysis
5. CONCLUSIONS AND RECOMMENDATIONS
5.1 Conclusion
5.2 Recommendations
Research Objectives & Key Themes
This thesis examines the impact of international remittances on economic growth within Sub-Saharan African (SSA) countries, utilizing a panel data approach to resolve the current lack of consensus in economic literature regarding the direction and nature of this effect.
- Analysis of remittance trends and their correlation with GDP growth in 29 SSA nations.
- Application of the System Generalized Method of Moments (SGMM) to address endogeneity.
- Evaluation of secondary panel data from 2004 to 2019 using World Development Indicators.
- Investigation of key economic channels including foreign capital inflows and human capital development.
- Policy recommendations for improving financial systems and migrant welfare frameworks.
Excerpt from the Book
1.1 Background of the Study
In recent decades, remittances have become an important source of foreign capital for many developing countries. However, there is no general consensus in policy debates on the impact of remittances on economic growth and poverty.
For many emerging economies, global remittances represent the single largest source of foreign exchange, exceeding export revenues, foreign direct investment (FDI), and different nonpublic capital (World Bank, 2013). Remittance -flows were five times higher than foreign aid in 2019 ($714 billion vs $153 billion) among this 78% of the worldwide proportion of remittance -flows to low-and middle-income countries (UNECA, 2020). Remittances to Sub-Saharan Africa grew from $34 billion in 2016 to $38 billion in 2017, and are expected to continue to grow into 2019(World Bank, 2018:33). Hence SSA is an interesting and dynamic case to examine. But less attention is given to remittance as determinants of economic growth.
In Kenya, remittances suited the highest source of foreign exchange by the end of 2019, ahead of coffee, tea, and horticultural exports (Mwaniki 2019). In Nigeria, remittances have a significant impact on economic growth – they contribute about 6.1% of GDP and are seven times higher than ODA flows (PWC 2020). Official remittance inflows to Nigeria account for over one-third of remittance flows to sub-Saharan African countries. In countries with a high share of remittance to GDP ratios, such as Liberia (FPA 2019) and the Gambia (Jeffang 2020), remittances account for over 31% and 22% of GDP respectively in 2019. The reduction in remittances will directly affect over 60% of households dependent on remittances at the micro-level and external reserves at the macro level (Bisong, Ahairwe, and Njoroge, 2020).
Summary of Chapters
1. INTRODUCTION: Outlines the study background, providing context on remittance growth in Sub-Saharan Africa and presenting the research problem, objectives, and limitations of the work.
2. LITERATURE REVIEW: Reviews theoretical perspectives on migration and remittances, including the pessimistic structuralism and optimistic pluralist schools, alongside general growth models and previous empirical findings.
3. RESEARCH METHODOLOGY: Details the panel data model specification and the use of the System Generalized Method of Moments (SGMM) to address endogeneity concerns in the economic analysis.
4. RESULT AND DISCUSSIONS: Presents the primary findings from the panel data analysis, including descriptive summaries and econometric evidence regarding the positive impact of remittances on economic output.
5. CONCLUSIONS AND RECOMMENDATIONS: Synthesizes the final results of the study and proposes policy interventions for strengthening remittances as a tool for national development in SSA countries.
Keywords
Remittance, Sub-Saharan Africa, Economic Growth, System GMM, Panel Data, Foreign Exchange, Foreign Aid, Human Capital, Financial Systems, Development Economics, Capital Accumulation, Migrant Welfare, Macroeconomics, Investment, Sustainable Growth.
Frequently Asked Questions
What is the core focus of this research paper?
The study primarily focuses on investigating the role and the measurable impact of international worker remittances on the economic growth of 29 Sub-Saharan African countries from 2004 to 2019.
What are the primary themes covered in the discussion?
The research covers remittance trends, the debate between migration optimists and pessimists, various growth theories (e.g., Harrod-Domar, Solow), and the empirical impact of control variables like human capital and trade openness.
What is the central research question?
The study aims to address two main questions: What are the trends of international remittances and economic growth in Sub-Saharan Africa, and what is the statistically significant effect of these remittances on regional economic growth?
Which scientific methodology is utilized?
The author employs a quantitative panel data approach, specifically using the System Generalized Method of Moments (SGMM) to manage endogeneity problems and ensure robust parameter estimation.
What does the main body of the work address?
The main body integrates a deep literature review, a data-driven methodology chapter, and an extensive analysis and discussion section that evaluates the regression results obtained through the SGMM model.
Which keywords best describe this study?
The primary keywords include Remittance, Sub-Saharan Africa, Economic Growth, System GMM, Human Capital, and Development Economics.
Did the study find that remittances are countercyclical?
The study's graphical analysis indicates that remittances in the selected SSA countries generally followed an increasing trend alongside economic growth, showing no clear countercyclical pattern for the analyzed period.
What specific economic channel does the author highlight as significant?
The author identifies human capital development—proxied by secondary school enrollment—as a significant channel through which remittances contribute to economic growth.
What practical recommendations are offered for SSA policymakers?
The author strongly recommends improving financial systems to lower the cost of transferring remittances, and establishing institutional frameworks to protect, support, and leverage the welfare of expatriate workers.
- Arbeit zitieren
- Gashaw Atilaw (Autor:in), 2021, The Effect of International Remittances on Economic Growth in Sub-Saharan Africa, München, GRIN Verlag, https://www.grin.com/document/1268390
