## Remittances, Financial Development, and Growth

_IMF Working Papers, December 1, 2005_

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**Canonical URL:** [Remittances, Financial Development, and Growth](https://www.imf.org/en/publications/wp/issues/2016/12/31/remittances-financial-development-and-growth-18607)

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## Bibliographic details
- Authors: Marta Ruiz-Arranz, Paola Giuliano
- Published: December 1, 2005
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451862539.001

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### Summary and research question
- There has been little systematic empirical study on the relationship between remittances and growth. This paper attempts to examine this relationship.
- Uses a newly constructed crosscountry data series for remittances covering a large sample of developing countries.
- Analyzes how a country's capacity to use remittances and its effectiveness in doing so might be influenced by local financial sector conditions.
- Explores the hypothesis that remittances can substitute for a lack of financial development and hence promote growth, given the difficulty of borrowing in developing countries.

### Empirical approach and methodology
- Controls for the endogeneity of remittances and financial development using a Generalized Method of Moments (GMM) approach.
- Examines the interaction between remittances and financial development and its impact on growth.
- Tests robustness across different measures of financial sector development and a number of sensitivity tests.

### Key findings
- Remittances can promote growth in less financially developed countries.
- The relationship:
  - Controls for endogeneity using GMM.
  - Does not depend on the particular measure of financial sector development used.
  - Is robust to a number of sensitivity tests.

### Subject classifications and keywords
- Subject: Balance of payments statistics, Commercial banks, Credit, Financial sector development, Remittances
- Keywords: balance of payments, impact of remittance, remittance, remittance variable, WP

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/remittances-financial-development-and-growth-18607_