Abstract
Empirical results of the effect of international remittances on economic growth of individual countries and groups of countries have yielded mixed results. This study is intended to add to the debate on the impact of international remittances on the aggregate output of individual countries, Ghana in this case. An earlier panel data study found a negative impact of remittance on real GDP and prompted further research on the topic for individual countries and groups of countries. The papers which followed and were able to correct for endogeneity in the models, found a mild positive impact of private unrequited remittances on economic growth. The impact of remittances on economic growth of a particular country depends on the proportion of remittances invested and consumed, the level of financial development and the quality of institutions in the country. This study used time series data from 1990 to 2014 on Ghana and found a positive impact of remittances on the growth rate of real GDP. Engel and Granger Cointegration test and Error Correction Models were used. Remittances were found to be pro-cyclical. Granger causality tests which corrects for the errors of cointegrated variables found causality running from financial development to remittances and from remittances to real GDP. Remittances have been found in other studies to benefit the Ghanaian economy by reducing poverty and sustaining the current account. This study shows a positive impact of remittances on aggregate output. Thus requiring policies to increase the flows and encourage their investment.
 Keywords: International Remittances, Economic Growth, Ghana, Financial Development.
Highlights
There are some identifiable channels through researchers
It is expected that studies on individual growing number of countries with high remittance countries will yield insights that may be peculiar to receipts and currently has a high remittance GDP ratio those countries and help policy makers in their policy by world standards – 13.3% in 2003 (Addision 2004)
Following from the surge in the flows, we can pose the following research questions: Has the remittance flows contributed positively to the growth rate of real GDP in Ghana? Have developments in the financial sector influenced the flows? How have remittance flows behaved along the business cycles in Ghana?
Summary
There are some identifiable channels through researchers. This is due to a surge in the flow of which remittances impact on the financial sector and international remittances worldwide, especially from economic activities in individuals’ countries. : (1) investigate the impact of remittances on the growth rate of real GDP, (2) analyse any causal relationship between international remittances and financial development in Ghana during the sample period and (3) explain the cyclical behavior of remittances. There is no study based on time series data in Ghana on the impact of remittances on economic growth, this paper will fill this gap and contribute to the literature on the macroeconomics of remittances. Sayan (2006) cautions against generalizing econometric evidence obtained from panel data for a group of countries regarding the nature of the relationship between GDP and remittances to all members of the group This is because panel estimates may conceal country specific characteristics. It is expected that country specific studies will yield additional knowledge
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