Relationship Between Economic Growth, Financial Development and Worker’s Remittances in South Asia

Abstract

Objective: this research aims to examine the relationship between financial development, remittances inflow and economic growth for South Asian countries. This study also aims to explore how the financial development of selected Asian countries is influenced by worker's remittances in short and long run periods. Methodology: we construct index of financial development using eight indicators of banking, insurance and stock markets. We use panel data for all the countries of South Asian region from 1988-2013. Results: our findings highlight that remittances inflows and economic growth have a positive and significant impact on financial development in long run. We also find evidence of bi-directional causality between inflows of foreign remittances and financial sector development. Contribution: this study attempts in contributing towards existing literature while determining the role of worker's remittances and economic growth on the financial development of South Asian countries.