Do Workers' Remittances Promote Financial Development?

40 Pages Posted: 20 Apr 2016

See all articles by Reena Aggarwal

Reena Aggarwal

Georgetown University - Robert Emmett McDonough School of Business ; European Corporate Governance Institute (ECGI)

Asli Demirgüç-Kunt

World Bank

Maria Soledad Martinez Peria

International Monetary Fund (IMF)

Date Written: July 1, 2006

Abstract

Workers' remittances to developing countries have become the second largest type of flows after foreign direct investment. The authors use data on workers' remittance flows to 99 developing countries from 1975-2003 to study the impact of remittances on financial sector development. In particular, they examine whether remittances contribute to increasing the aggregate level of deposits and credit intermediated by the local banking sector. This is an important question considering the extensive literature that has documented the growth-enhancing and poverty-reducing effects of financial development. The findings provide strong support for the notion that remittances promote financial development in developing countries.

Keywords: Remittances, Economic Theory & Research, Pro-Poor Growth and Inequality, Banks & Banking Reform, Financial Economics

Suggested Citation

Aggarwal, Reena and Demirgüç-Kunt, Asli and Martinez Peria, Maria Soledad, Do Workers' Remittances Promote Financial Development? (July 1, 2006). World Bank Policy Research Working Paper No. 3957, Available at SSRN: https://ssrn.com/abstract=923264

Reena Aggarwal (Contact Author)

Georgetown University - Robert Emmett McDonough School of Business ( email )

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HOME PAGE: http://https://gufaculty360.georgetown.edu/s/contact/00336000014RhE9AAK/reena-aggarwal

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
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Belgium

Asli Demirgüç-Kunt

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Maria Soledad Martinez Peria

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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