Remittances and Economic Growth Nexus: Empirical Evidence from Kenya

Abstract

Remittances inflow is one of the major sources of capital flows in the world. Though developing countries and especially Sub-Saharan Africa does not have a bigger share of this capital flow, remittances is noted to be very useful in promoting household welfare and health in developing countries. The main objective of this study is to determinate the effect of international remittances on economic growth in Kenya. The study also investigated the causality between international remittances and economic growth. The data used was sourced from World Bank's Development Indicators for the period 1993 to 2014. The study used Granger Causality to investigate the causality between international remittances on economic growth in Kenya. The (ARDL) estimation method was used to determine this effect. The results show that the international remittances indicators are significant factors influencing the economic growth in Kenya. Thus it can be concluded that economic growth in the Kenya is largely driven by international remittances.