Migrant remittances and economic growth: The role of financial development and institutional quality

Abstract

This paper investigates the conditional effects of remittances on economic growth in 14 Middle East and North Africa (MENA) countries. Using unbalanced panel data over the period 1982-2016, we study the hypothesis that the effect of remittances on economic growth varies depending on the level of financial development and institutional environment in recipient countries. We use Two-Stage Least Squares (2SLS/IV) instrumental variables method in which we address the endogeneity of remittances. Our results reveal a complementary relationship between financial development and remittances to ensure economic growth. The estimations show that remittances promote growth in countries with a developed financial system and a strong institutional environment.