Diaspora Remittance Inflow, Financial Development and the Industrialisation of Africa

African Governance and Development Institute WP/16/037

28 Pages Posted: 2 Oct 2016

See all articles by Uchenna Efobi

Uchenna Efobi

Covenant University

Simplice Asongu

African Governance and Development Institute

Chinelo Okafor

Covenant University

Vanessa S. Tchamyou

African Governance and Development Institute

Belmondo Tanankem

Ministry of Economy, Planning and Regional Development - Department of Analysis and Economic Policies

Date Written: September 30, 2016

Abstract

The paper assesses how remittances directly and indirectly affect industrialisation in a panel of 49 African countries for the period 1980-2014. The indirect impact is assessed through financial development channels. The empirical evidence is based on three interactive and non-interactive simultaneity-robust estimation techniques, namely: (i) Instrumental Fixed Effects (FE) to control for the unobserved heterogeneity; (ii) Generalised Method of Moments (GMM) to control for persistence in industrialisation and (iii) Instrumental Quantile Regressions (QR) to account for initial levels of industrialisation. The non-interactive specification elucidates direct effects of remittances on industrialisation whereas interactive specifications explain indirect impacts. The findings broadly show that for certain initial levels of industrialisation, remittances can drive industrialisation through the financial development mechanism. Policy implications are discussed.

Keywords: Africa, Financial development, Industrialisation, Remittances

JEL Classification: F24, F43, F63, G20, O55

Suggested Citation

Efobi, Uchenna and Asongu, Simplice and Okafor, Chinelo and S. Tchamyou, Vanessa and Tanankem, Belmondo, Diaspora Remittance Inflow, Financial Development and the Industrialisation of Africa (September 30, 2016). African Governance and Development Institute WP/16/037. Available at SSRN: https://ssrn.com/abstract=2846249 or http://dx.doi.org/10.2139/ssrn.2846249

Uchenna Efobi

Covenant University ( email )

P.M.B. 1023
Km 10 Idiroko road
Ota, Ogun State 234
Nigeria
+48036273494 (Phone)

Simplice Asongu (Contact Author)

African Governance and Development Institute ( email )

P.O. Box 8413
Yaoundé, 8413
Cameroon

Chinelo Okafor

Covenant University ( email )

P.M.B. 1023
Km 10 Idiroko road
Ota, Ogun State 234
Nigeria

Vanessa S. Tchamyou

African Governance and Development Institute ( email )

P.O. Box 8413
Yaoundé, 8413
Cameroon

Belmondo Tanankem

Ministry of Economy, Planning and Regional Development - Department of Analysis and Economic Policies ( email )

Cameroon

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