Financial development, remittances and economic growth: A threshold analysis

James Atta Peprah,Abel Nyarko Asomani,Isaac Kwesi Ofori,Mariam Camarero

doi:10.1080/23322039.2019.1625107

James Atta Peprah, Abel Nyarko Asomani + Show 2 more

Open Access

https://doi.org/10.1080/23322039.2019.1625107

Copy DOI

Abstract

Sources of economic growth in Ghana have not been clear. Several studies have contributed to the finance and growth literature with little attention on remittances and the joint effect of financial...

Highlights

Financial development and remittances have been identified as major drivers of growth especially in developing countries (Chowdhury, 2016; Nyamongoa, Misatib, Kipyegonb, & Ndirangu, 2012)
The study uses Ghana as a case study to test whether the magnitude of the joint effect of financial development and remittances inflow on growth is higher than their individual effects. This is premised on the fact that the potential of Ghana’s growing financial development and huge remittance inflow in spurring growth are only generally gleaned from public discourse without any empirical content
We show that a 1 percent increase in remittances given financial development induces economic growth by 0.5 percent (See Appendix C)

Summary

Introduction

Financial development and remittances have been identified as major drivers of growth especially in developing countries (Chowdhury, 2016; Nyamongoa, Misatib, Kipyegonb, & Ndirangu, 2012). Growth in remittances to low-income countries was projected to grow at a faster rate of 12.3 percent during this same period This according to the report was because economic conditions in remittance-sending countries such as the United States were strengthened (World Bank, 2014; Chowdhury, 2016). The study uses Ghana as a case study to test whether the magnitude of the joint effect of financial development and remittances inflow on growth is higher than their individual effects This is premised on the fact that the potential of Ghana’s growing financial development and huge remittance inflow in spurring growth are only generally gleaned from public discourse without any empirical content. The joint effect of financial development and remittances if present indicates that growth is enhanced through policies that target financial sector development and remittances simultaneously.

Literature survey

Methodology

Threshold Effect for Financial Development