| By: |
Paola Giuliano (International Monetary Fund and IZA Bonn);
Marta Ruiz-Arranz (International Monetary Fund) |
| Abstract: |
Despite the increasing importance of remittances in total international
capital flows, the relationship between remittances and growth has not been
adequately studied. This paper studies one of the links between remittances
and growth, in particular how local financial sector development influences a
country’s capacity to take advantage of remittances Using a newly-constructed
dataset for remittances covering about 100 developing countries, we find that
remittances boost growth in countries with less developed financial systems by
providing an alternative way to finance investment and helping overcome
liquidity constraints. The study also explores some common myths about
remittances and suggests that they are predominantly profit-driven and mostly
pro-cyclical. |
| Keywords: |
remittances, financial development, growth |
| JEL: |
F22 F43 O16 |
| Date: |
2006–06 |
| URL: |
http://d.repec.org/n?u=RePEc:iza:izadps:dp2160&r=fdg |