Remittances, Financial Markets Development and Economic Growth: The Case of Latin America and Caribbean

33 Pages Posted: 15 Sep 2005 Last revised: 7 Apr 2009

Date Written: April 6, 2009

Abstract

Within a theoretical framework, the author analyzes the effects that both workers' remittances and financial intermediation have on economic growth. It is found, among other things, that remittances can have significant positive long-run effects on growth. The author confronts the implications of our theoretical model with panel data for countries in Latin America and Caribbean. After considering the effect of long-run investment and demographic variables, and controlling for fixed time and country effects, the empirical analysis indicates that financial intermediation tends to increase the responsiveness of growth to remittances. The overall conclusion is that making financial services more generally available should lead to even better use of remittances, thus boosting growth in these countries.

Keywords: Remittances, growth, financial market development

JEL Classification: E22, O16, O57

Suggested Citation

Mundaca, Gabriela, Remittances, Financial Markets Development and Economic Growth: The Case of Latin America and Caribbean (April 6, 2009). Review of Development Economics, Vol. 13, No. 2, pp. 288-303, 2009. Available at SSRN: https://ssrn.com/abstract=799484

Gabriela Mundaca (Contact Author)

The World Bank ( email )

701 18th Street NW
Washington, DC 20433
United States
301-273-5701 (Phone)

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