nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2020‒11‒09
nineteen papers chosen by

  1. Assimilation and Diffusion of Multi-Sided Platforms in Dynamic B2B Networks: Inhibiting Factors and Their Consequences By Wallbach, Sören
  2. Close social networks among older adults: the online and offline perspectives By Beatriz Sofía Gil-Clavel; Emilio Zagheni; Valeria Bordone
  3. Digital Kelsoism: Employee Stock Ownership as a Pattern for the Online Economy By Schneider, Nathan
  4. Digital Divide: County Broadband Access in Tennessee By Upendram, Sreedhar; Wilson, Brad; Baxter, Isabella
  5. E-relationship quality evaluation by users of "personal account" mobile apps By Éric Barquissau
  7. Data science in economics: comprehensive review of advanced machine learning and deep learning methods By Nosratabadi, Saeed; Mosavi, Amir; Duan, Puhong; Ghamisi, Pedram; Filip, Ferdinand; Band, Shahab S.; Reuter, Uwe; Gama, Joao; Gandomi, Amir H.
  8. ICT, Collaboration, and Science-Based Innovation: Evidence from BITNET By Kathrin Wernsdorf; Markus Nagler; Martin Watzinger
  9. Sustainable Finance for Sustainable Development By Giovanni Ferri; Bonnie Annette Acosta
  10. Cryptocurrency portfolio optimization with multivariate normal tempered stable processes and Foster-Hart risk By Tetsuo Kurosaki; Young Shin Kim
  11. Speculating on the application of blockchains in the circular economy By Plinio Limata
  12. The Economy, the Pandemic, and Machine Learning By Patrick T. Harker
  13. get to know crowdfunding (revisi) By Rahmadanti, Wina illirian sevi
  14. Internet Access and Partnership Formation in the United States By Maria Sironi; Ridhi Kashyap
  15. Towards Self-Regulating AI: Challenges and Opportunities of AI Model Governance in Financial Services By Eren Kurshan; Hongda Shen; Jiahao Chen
  16. Decentralized Task Coordination By Jens Gudmundsson; Jens Leth Hougaard; Trine Tornøe Platz
  17. Community perceptions of the social and economic impacts of COVID-19 in Myanmar: Insights from round 3 of the National COVID-19 Community Survey (NCCS) – August and September 2020 By Oo, Than Zaw; Lambrecht, Isabel; Headey, Derek D.; Goudet, Sophie
  18. Inequality and Female Labour Force Participation in West Africa By Chimere O. Iheonu; Ozoemena S. Nwodo; Uchechi S. Anaduaka; Ugochinyere Ekpo
  19. Remittances and Financial Development in Africa By Ibrahim A. Adekunle; Sheriffdeen A. Tella; Kolawole Subair; Soliu B. Adegboyega

  1. By: Wallbach, Sören
    Abstract: Spurred on by increasing digitalization and the rise of technology companies such as Facebook, Airbnb or Uber, multi-sided platforms (MSPs) have become increasingly important in a wide range of industries in recent years. In general, MSPs represent an electronic marketplace in which two or more groups of actors interact, and the decisions of individual actors influence the decision-making behavior of the remaining actors. Due to their distributed nature and their interdependencies with institutions, markets, and technologies, MSPs depict unique, new socio-technical artifacts and therefore present researchers with an exciting and challenging research object. Previous research on MSPs have predominantly taken a pro-innovative perspective and have accumulated a vast knowledge base on factors that promote the success of MSPs. However, the triumphant growth and success of MSPs, such as Airbnb or Uber, represent the exception rather than the rule. Most multi-sided platforms are struggling hard to stay viable and often lose this battle. Failure of an MSP can result in massive financial damage for companies, which is revealed, for example, by the $4 billion collapse of General Electric's "Predix" platform. Existing technology diffusion and adoption models provide only anecdotal evidence to the failure of MSPs, which is why knowledge of factors that inhibit the diffusion of MSPs is particularly important. Scholars, therefore, call for a comprehensive and systematic investigation of factors inhibiting the diffusion of MSPs as well as for the development of new or the extension of existing technology diffusion and adoption models to increase their explanatory and predictive validity. Network effects are a key characteristic and a crucial driver for the diffusion of MSPs. The impacts of diffusion-inhibiting factors on network effects have only been superficially examined in previous research. In contrast, the beneficial influence of network effects in the case of one- or two-sided platforms in conventional market relations between businesses and consumers (e.g., game consoles or service platforms such as Airbnb) has been thoroughly investigated. However, dependencies and areas of tension, which mainly occur in the diffusion of technology within or between different organizations (company to company context, B2B), have been neglected. Furthermore, case studies have often analyzed MSPs where management and ownership are carried out by a single organization. Nowadays, however, organizations are no longer isolated. They create their values together and act in corporate networks. As a result, the highly complex management structure within these networks can also influence the diffusion of multi-sided platforms. Dynamic B2B networks are characterized by intensive cooperation between loosely connected organizations in a fast-changing environment with a high degree of uncertainty. The organizations operating in the network are dependent on the rapid exchange of information with their competitors and are therefore in a co-operative and competing business relationship with them at the same time. The management structure within a dynamic B2B network is shared, the goods or services produced are easily interchangeable and are provided by several organizations. Although MSPs have been developed specifically for the interaction of different actors and offer a fast exchange of information between multiple organizations, the diffusion of these systems in dynamic B2B networks is particularly challenging. In summary, MSPs depict new socio-technical information system artifacts that have so far been examined from a pro-innovative perspective. Their manifold interdependencies with institutions, markets, and technologies lead to a highly complex diffusion process in which, among others, internal and external organizational factors, as well as the individuals' pre- and post-adoption behavior must be taken into account. Previous research cannot provide sufficient explanation for why MSPs fail, especially in dynamic B2B networks where a large number of organizations operate dynamically in an environment with frequently changing business relationships. Motivated by the limited explanatory and predictive validity of existing technology diffusion and adoption models for the investigation of multi-sided platforms in dynamic B2B networks, this thesis will examine factors inhibiting the diffusion of MSPs as well as their impact on network effects and on individuals’ pre- and post-adoption behavior. For this purpose, five studies have been conducted to systematically illuminate various partial aspects of the diffusion of MSPs. The first study (Article 1) identified 21 factors that inhibit the diffusion of MSPs in dynamic B2B networks. The second study (Article 2) examined the influence of these 21 inhibiting factors on network effects, which depict main drivers for the diffusion of MSPs. Studies three to five (Articles 3 - 5) each consider the influence of a specific inhibitory factor on individuals' pre- and post-adoption behavior. In detail, article 3 examines the extent to which specific technological features (factor functionalities) influence trust in technology and subsequently, the adoption of the technology. Article 4 examines the extent to which causal attributions (factor blaming other actors) influence users' information system continuance intention. Finally, article 5 analyses the extent to which users' continuance intention is influenced by the personality trait resistance to change (factor spirit of innovations). Taken together, this thesis provides a deeper and more comprehensive understanding of the diffusion of MSPs in dynamic B2B networks. The systematical and comprehensive investigation of factors inhibiting the diffusion of MSPs in dynamic B2B networks contributes to answering various calls for research. By analyzing the relationships between factors inhibiting diffusion and network effects, this thesis contributes to research at the interface between platform and technology diffusion research. Alongside these contributions to research, each of the five articles contained an in-depth and comprehensive discussion on contributions to research and practice.
    Date: 2020–09–28
  2. By: Beatriz Sofía Gil-Clavel (Max Planck Institute for Demographic Research, Rostock, Germany); Emilio Zagheni (Max Planck Institute for Demographic Research, Rostock, Germany); Valeria Bordone (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: Qualitative studies have found that the use of Information and Communication Technologies is related to an enhanced quality of life for older adults, as these technologies might act as a medium to access social capital regardless of distance. In order to quantitatively study the association between older people’s characteristics and the likelihood of having a network of close friends offline and online, we use data from the Survey of Health, Ageing and Retirement in Europe and from Facebook. Using a novel approach to analyze aggregated and anonymous Facebook data within a regression framework, we show that the associations between having close friends and age, sex and being a parent are the same offline and online. Migrants who use internet are less likely to have close friends offline, but migrants who are Facebook users are more likely to have close friends online, suggesting that digital relationships may compensate for the potential lack of offline close friendships among older migrants.
    Keywords: Europe, old age, social capital, social network
    JEL: J1 Z0
    Date: 2020
  3. By: Schneider, Nathan (University of Colorado Boulder)
    Abstract: Louis Kelso’s Employee Stock Ownership Plan (ESOP) became a feature of US employment law in 1974, and since then it has enabled millions of people to benefit from an ownership stake in their workplaces. But Kelso, together with his collaborator Patricia Hetter Kelso, envisioned much more than the ESOP. They proposed a series of similarly structured plans that involved leveraged financing for broad-based ownership among stakeholders beyond just the employment relationship, situated in a distinct theory of political economy. This essay argues that Kelso and Kelso’s proposals deserve reconsideration in an age of the increasingly dominant online economy. Although first envisioned in another time, they anticipate frequent anxieties and ambitions surrounding digital networks, from gig work and big data to universal basic income. The proposals also come with financing mechanisms and policy tools that, as with the ESOP, could make them scalable and self-perpetuating. The essay reconsiders several Kelsoist strategies in light of the digital economy and addresses concerns from critical research on the ESOP legacy.
    Date: 2020–10–20
  4. By: Upendram, Sreedhar; Wilson, Brad; Baxter, Isabella
    Abstract: Digital divide is defined as the gap between underserved communities that have poor or limited internet access and the communities that have relatively better access to broadband internet (25 megabits per second download/3 megabits per second upload speeds). While the Federal Communications Commission (FCC) claims that broadband internet is not available to 24.7 million people in the United States, data from Microsoft indicates that 162.8 million people (almost half of the population of the United States) do not use internet at broadband speeds (Hegle and Wilding, 2019). Broadband internet is still out of reach for many communities in Tennessee, with only 53.4 percent of residents adopting broadband in 2019 (FCC, 2019). With the shift to digital technology and widespread applications, access to broadband internet has become critical for economic development, specifically for education, work force, health care and recreation. Impacts of the digital divide have been broadly highlighted during the COVID-19 pandemic. Where possible, employees have shifted to working at home. Similarly, K-12 schools, colleges and universities are offering classes online, and many residents are increasingly choosing online methods to order retail goods and services. Additionally, people need broadband internet to access up-to-date health care, prescriptions and health services information about COVID-19 from news and media outlets, as well as the state and federal government. The purpose of this publication is to inform Extension agents, local government leaders and economic development professionals about the digital divide, the relative measures of socioeconomic status and broadband infrastructure across Tennessee. This publication is to be used in conjunction with the county digital divide index profiles available at ital-divide-index/.
    Keywords: Community/Rural/Urban Development, Public Economics, Teaching/Communication/Extension/Profession
    Date: 2020–10–29
  5. By: Éric Barquissau (ESTIA Recherche - Ecole Supérieure des Technologies Industrielles Avancées (ESTIA))
    Abstract: The purpose of this article is to investigate the way users of "personal accounts" mobile apps evaluate e-relationship quality within two sectors: the banking sector and the mobile phone sector. This research deals with an important concept: appropriation. A qualitative study has been conducted in order to build a research model and to create a measurement scale to study the appropriation of "personal accounts" mobile apps. Therefore, an online survey (N=416) was conducted to test the hypothesis. The findings suggest that the appropriation of "personal accounts" mobile apps is a mediating variable between perceived ease of use, perceived usability and relationship quality, both in the banking sector and in the mobile phone sector. In the same way, privacy has a positive influence on e-relationship quality. Moreover, perceived interactivity has a positive influence on e-relationship quality, but that particular hypothesis is partially validated. Finally, social presence does not have a positive influence on e-relationship quality.
    Abstract: Cet article vise à comprendre la manière dont les utilisateurs d'applications mobiles « espace client » évaluent la qualité de la relation client avec leur fournisseur de services. Une étude qualitative a été menée afin d'étudier les variables permettant de construire le modèle de recherche et de proposer une échelle de mesure de l'appropriation des applications mobiles « espace client ». Par la suite, un modèle de recherche est testé auprès d'un échantillon de 416 personnes, utilisatrices d'applications mobiles « espace client » dans le secteur bancaire et dans le secteur de la téléphonie mobile. Il en résulte que l'appropriation de l'espace client joue un rôle médiateur entre deux variables-la facilité d'utilisation perçue et l'utilité perçue-et la qualité de la relation client en ligne. La sécurité/confidentialité de l'espace client du site web exerce une influence positive sur la qualité de la relation client en ligne. L'hypothèse postulant que l'interactivité perçue exerce une influence positive sur la qualité de la relation client en ligne est partiellement validée. En revanche, la présence sociale n'exerce pas une influence positive sur la qualité de la relation client en ligne.
    Keywords: Adoption and appropriation,Personal account,Interactivity,Privacy,e-relationship quality,Qualité de la relation client en ligne,Adoption et appropriation,Espace client,Interactivité,Sécurité/confidentialité
    Date: 2020–05–05
  6. By: Hoang, Ha
    Abstract: Industrial Revolution 4.0 is taking place strongly and has gained a lot of special attention from the public recently. For the financial world, this revolution has given birth to Fintech – a generation of start-up companies with advanced technology based on the Internet. Most Fintech companies start out with payment services, but in many other areas of the financial world, by their own strategies, Fintech is competing directly or indirectly with segments that are the monopoly of traditional financial services such as capital mobilization, lending, asset management, etc. The results show that Fintech has had a tremendous impact on the financial world and traditional financial institutions. However, the challenges and risks of this start-up generation should not be taken seriously and neglected their positive impacts such as promoting innovation, increasing competition, better serving customers. We also believe that Fintech will be a promising land for startups in Vietnam. As many studies in the world have shown, the government need to observe closely, but should not lay down rules too soon or too closely because it can extinguish a field that has many advantages for Vietnam in the 4.0 revolution. This is also an important citation for further research in this field in Vietnam.
    Date: 2020–10–16
  7. By: Nosratabadi, Saeed; Mosavi, Amir; Duan, Puhong; Ghamisi, Pedram; Filip, Ferdinand; Band, Shahab S.; Reuter, Uwe; Gama, Joao; Gandomi, Amir H.
    Abstract: This paper provides a state-of-the-art investigation of advances in data science in emerging economic applications. The analysis was performed on novel data science methods in four individual classes of deep learning models, hybrid deep learning models, hybrid machine learning, and ensemble models. Application domains include a wide and diverse range of economics research from the stock market, marketing, and e-commerce to corporate banking and cryptocurrency. Prisma method, a systematic literature review methodology, was used to ensure the quality of the survey. The findings reveal that the trends follow the advancement of hybrid models, which, based on the accuracy metric, outperform other learning algorithms. It is further expected that the trends will converge toward the advancements of sophisticated hybrid deep learning models.
    Date: 2020–10–15
  8. By: Kathrin Wernsdorf; Markus Nagler; Martin Watzinger
    Abstract: Does access to information and communication technologies (ICT) increase innovation? We examine this question by exploiting the staggered adoption of BITNET across U.S. universities in the 1980s. BITNET, an early version of the Internet, enabled e-mail-based knowledge exchange and collaboration among academics. After the adoption of BITNET, university-connected inventors increase patenting substantially. The effects are driven by collaborative patents by new inventor teams. The patents induced by ICT are exclusively science-related and stem from fields where knowledge can be codified easily. In contrast, we neither find an effect on patents not building on science nor on inventors unconnected to universities.
    Keywords: ICT, communication, knowledge diffusion, science-based innovation, university-patenting
    JEL: H54 L23 L86 O30 O32 O33
    Date: 2020
  9. By: Giovanni Ferri (LUMSA University); Bonnie Annette Acosta
    Abstract: The paper explores how ethical and sustainable oriented finance is key to reach sustainable development by tackling environmental risk through green finance and showing empirical evidence on the link between finance and inequality. The theory provided puts in the right mind frame to analyze markets, intermediaries and instruments with a sustainable lens to focus on the benefits that have brought to sustainable development. A discussion is presented between different intermediaries and highlights the benefits of cooperative banks especially the close relationship of customers and bank and the resilience it gives to Small and Medium Enterprises (SMEs) in difficult times. Different investments strategies are discussed walking through the evolution of Sustainable and Responsible Investing (SRI) funds and diving into the ESG analysis to use as criteria to allocate investments based on environmental, social and governance principles. Microfinance is introduced as a different market that has reached the people at the bottom of the pyramid and highlights the key role it will play to bring financial inclusion. Islamic finance and Fintech are also discussed. Different instruments are presented to understand the current landscape of how different investors are using innovative products to attack social and environmental problems. Finally, five different ways are presented on how policies can strengthen and support sustainable development arguing that the most important is by promoting sustainable footprint certification.
    Keywords: Sustainable Finance, SDGs, Green Bonds, Social Bonds, Fintech, Human Centered Business Model.
    JEL: G18 G24 G28 G38 M14 O35 P43 Q01 Q5 Q58
    Date: 2019–07
  10. By: Tetsuo Kurosaki; Young Shin Kim
    Abstract: We study portfolio optimization of four major cryptocurrencies. Our time series model is a generalized autoregressive conditional heteroscedasticity (GARCH) model with multivariate normal tempered stable (MNTS) distributed residuals used to capture the non-Gaussian cryptocurrency return dynamics. Based on the time series model, we optimize the portfolio in terms of Foster-Hart risk. Those sophisticated techniques are not yet documented in the context of cryptocurrency. Statistical tests suggest that the MNTS distributed GARCH model fits better with cryptocurrency returns than the competing GARCH-type models. We find that Foster-Hart optimization yields a more profitable portfolio with better risk-return balance than the prevailing approach.
    Date: 2020–10
  11. By: Plinio Limata (LUMSA University)
    Abstract: Can the blockchain be the infrastructure of the circular economy paradigm? In the present paper, we first explore the concepts of the blockchain and circular economy and consider why and how they could interact. Our inquiry of the literature provides a positive theoretical answer. However, shortcomings are also reviewed in terms of their practical implementation. Much will depend on how the blockchain technology and its functionalities (e.g., smart contracts, distributed autonomous organizations) will be able to support the circular economy ecosystem.
    Keywords: Blockchain, Circular Economy
    Date: 2019–11
  12. By: Patrick T. Harker
    Abstract: The U.S. economy is recovering more strongly than originally anticipated, but significant risks related to COVID-19 and fiscal policy remain, said Patrick T. Harker, president and CEO of the Federal Reserve Bank of Philadelphia. Harker, delivering a keynote address virtually at the Official Monetary and Financial Institutions Forum, focused on artificial intelligence and machine learning.
    Keywords: COVID-19
    Date: 2020–09–29
  13. By: Rahmadanti, Wina illirian sevi
    Abstract: Crowdfunding adalah sejenis crowdsourcing dengan memungkinkan pendukung online untuk terlibat proyek sosial untuk berkontribusi pada sumber daya dalam mengatasi masalah sosial, yang serupa logika sebagai crowdsourcing dalam proyek humaniora (Terras, 2015)
    Date: 2020–10–04
  14. By: Maria Sironi (Social Research Institute, University College London); Ridhi Kashyap (Department of Sociology and Nuffield College, University of Oxford)
    Abstract: The Internet has fundamentally altered how we communicate, access information and who we can interact with. These features are all potentially salient for mate search – but the implications of Internet access for partnership formation are theoretically ambiguous. We examine the association between Internet access and heterosexual and homosexual partnership formation using nationally-representative data from the National Longitudinal Survey of Youth (NLSY) and the Current Population Survey (CPS) from the US. Across both data sources, we find that the association between Internet access and partnership formation (in the NLSY) and partnership status (in the CPS) is age-dependent. While negative at younger ages, the association becomes positive as individuals grow older and reach their mid- to late-20s for both homosexual and heterosexual partnerships. We interpret these results to suggest that the Internet facilitates union formation when individuals approach the stage in their life course when they feel ready to commit to a long-term partnership.
    Keywords: Internet Access; Technology; Union Formation; Life Course; NLSY97; CPS.JEL
    JEL: J12 O51 Z13
    Date: 2020–10–01
  15. By: Eren Kurshan; Hongda Shen; Jiahao Chen
    Abstract: AI systems have found a wide range of application areas in financial services. Their involvement in broader and increasingly critical decisions has escalated the need for compliance and effective model governance. Current governance practices have evolved from more traditional financial applications and modeling frameworks. They often struggle with the fundamental differences in AI characteristics such as uncertainty in the assumptions, and the lack of explicit programming. AI model governance frequently involves complex review flows and relies heavily on manual steps. As a result, it faces serious challenges in effectiveness, cost, complexity, and speed. Furthermore, the unprecedented rate of growth in the AI model complexity raises questions on the sustainability of the current practices. This paper focuses on the challenges of AI model governance in the financial services industry. As a part of the outlook, we present a system-level framework towards increased self-regulation for robustness and compliance. This approach aims to enable potential solution opportunities through increased automation and the integration of monitoring, management, and mitigation capabilities. The proposed framework also provides model governance and risk management improved capabilities to manage model risk during deployment.
    Date: 2020–10
  16. By: Jens Gudmundsson (Department of Food and Resource Economics, University of Copenhagen); Jens Leth Hougaard (NYU-Shanghai, China; Department of Food and Resource Economics, University of Copenhagen); Trine Tornøe Platz (Department of Food and Resource Economics, University of Copenhagen)
    Abstract: We study decentralized task coordination. Tasks are of varying complexity and agents asymmetric: agents capable of completing high-level tasks may also take on tasks originally contracted by lower-level agents, facilitating system-wide cost reductions. We suggest a family of decentralized two-stage mechanisms in which agents first announce preferred individual workloads and then bargain over the induced joint cost savings. The second-stage negotiations depend on the first-stage announcements as specified through the mechanism's recognition function. We characterize mechanisms that incentivize cost-effective task allocation and further single out a particular mechanism, which additionally ensures a fair distribution of the system-wide cost savings.
    Keywords: Decentralized mechanisms, Implementation, Bargaining, Consistency, Blockchain
    JEL: C72 C78 D47 D63 D78
    Date: 2020–10
  17. By: Oo, Than Zaw; Lambrecht, Isabel; Headey, Derek D.; Goudet, Sophie
    Abstract: To better understand the economic and social impacts of the COVID-19 crisis on Myanmar’s diverse rural and urban communities, a multi-round large-scale community telephone survey is being conducted. The first round of the survey took place in June and July 2020, while the second round was done in August. This report focuses on key findings from the third round of survey done in August and September 2020. The survey obtained information from community respondents that had participated in the first or second rounds as well as from additional communities. In total, the third round obtained responses from 186 townships across Myanmar.
    Keywords: MYANMAR, BURMA, SOUTHEAST ASIA, ASIA, COVID-19, Coronavirus, coronavirus disease, Coronavirinae, economic impact, rural areas, urban areas, surveys, social protection, migration, agricultural production, remittances, health, health services, trade, policies, households, phone surveys, Covid-19 prevention measures
    Date: 2020
  18. By: Chimere O. Iheonu (CSEA Africa, Abuja, Nigeria); Ozoemena S. Nwodo (Coal City University, Enugu, Nigeria); Uchechi S. Anaduaka (University of Nigeria, Nsukka, Nigeria); Ugochinyere Ekpo (University of Nigeria, Nsukka, Nigeria)
    Abstract: This study examined the impact of income inequality on female labour force participation in West Africa for the period 2004 to 2016. The study employed the Gini coefficient, the Atkinson index and the Palma ratio as measures of income inequality. For robustness, the study also utilises female employment and female unemployment as measures of female labour force participation. The study employed the instrumental variable fixed effects model with Driscoll and Kraay standard errors to account for simultaneity/reverse causality, serial correlation, groupwise heteroskedasticity and cross-sectional dependence. The empirical results reveal that the three measures of income inequality significantly reduce the participation of women in the labour force in West Africa. The study also revealed that domestic credit, remittances and female education are positively associated with female labour force participation in the sub region. Further findings reveal that economic development reduces the participation of women in the labour force in West Africa with the U-shaped feminization theory not valid for the West African region. The study however revealed an inverted U-shaped relationship between inequality and female unemployment. Policy recommendations based on these findings are discussed.
    Keywords: Inequality, Female Labour, Instrumental Variable; Fixed Effects; West Africa
    JEL: C23 D31 J21
    Date: 2020–01
  19. By: Ibrahim A. Adekunle (Olabisi Onabanjo University, Ago-Iwoye, Nigeria); Sheriffdeen A. Tella (Olabisi Onabanjo University, Ago-Iwoye, Nigeria); Kolawole Subair (Yobe State University, Damaturu, Nigeria); Soliu B. Adegboyega (Olabisi Onabanjo University, Ogun State, Nigeria)
    Abstract: Despite the magnitude of remittances as an alternative source of investment financing in Africa, the financial sector in Africa has significantly remained underdeveloped and unstable. Finding a solution to Africa's financial deregulation problems has proved tenacious partly because of inadequate literature that explain the nature of Africa capital and financial markets which has shown to be unorganised, spatially fragmented, highly segmented and invariably externally dependent. We examine the structural linkages between remittances and financial sector development in Africa. Panel data on indices of remittances was regressed on indices of financial sector development in fifty-three (53) African countries from 1986 through 2017 using the Pooled Mean Group (PMG) estimation procedure. We accounted for cross-sectional dependence inherent in ordinary panel estimation and found a basis for the strict orthogonal relationship among the variables. Findings revealed a positive long-run relationship between remittances and financial development with a significant (positive) short-run relationship. It is suggested that, while attracting migrants' transfers which can have significant short-run poverty-alleviating advantages, in the long run, it might be more beneficial for African governments to foster financial sector development using alternative financial development strategies.
    Keywords: Remittance, Financial Development, Pooled Mean Group, Africa
    JEL: F37 G21
    Date: 2020–01

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