Remittances, Financial Development and Economic Growth: The Case of North African Countries

Zouheir, Abida
Sghaier, Imen Mohamed
Publication date: 
JEL codes: 
E21 - Consumption; Saving; Wealth, F21 - International Investment; Long-Term Capital Movements, F34 - International Lending and Debt Problems, J61 - Geographic Labor Mobility; Immigrant Workers.
The present paper examines the causal linkage between remittances, financial development, and economic growth in a panel of 4 countries of North Africa (Tunisia, Morocco, Algeria and Egypt) over the period 1980-2011. Using system Generalized Method of Moment (GMM) panel data analysis, we find strong evidence of a positive relationship between remittances and economic growth. We also find evidence that remittances appear to be working as a complement to financial development and, moreover, that the effect of remittances is more pronounced in the presence of the financial development variable. The policy implications of this study appeared clear. Improvement efforts need to be driven by local-level reforms to ensure the development of domestic financial system in order to take advantage of remittances.
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