Diaspora Remittances-Stock Market Development: An Inclusive Framework for Zimbabwe

Abstract

This study sought to determine an inclusive framework for diaspora remittances growth and stock market development. Stock market plays an important role in economic development and growth by creating liquidity and allocation of resources to deficit sectors of the economy. The study used the ARDL-ECM in the determination of the relationship between the two variables, using data for the period 1990 to 2020. Eviews Version 9.0 Statistical Package was used to run the regressions. This study found that Diaspora Remittances have an insignificant negative relationship with Stock Market Development for Zimbabwe. This may have been due to Diaspora Remittances flowing through informal channels and, therefore, may have not be tapped on for Stock Market Development. The study recommend an inclusive framework that allows the government to take measures to boost investor confidence, to encourage the diaspora population to invest more in Zimbabwe through elimination of corruption, having stable political environment, formulation of policies that ensures stability in the macroeconomic environment, and having the right governance systems. Encouraging campaigns which must be run by the government and nongovernmental organizations educating Zimbabweans in the diaspora of the benefits of investing home. Allowing the government to set up formal diaspora remitting channels which have minimal charges to encourage more remittances to flow through the channels. Government must also offer favourable interest rates on bond holders so as to lure those in the diaspora to invest in the stock market.