Inward Remittances, Financial Sector Development and Economic Growth in Nigeria: ECM Approach
Keywords:
Inward remittances, economic growth, error correction mechanism
Abstract
This study sought to empirically examine the relationship between inward remittances and economic growth in Nigeria. Annual time series data covering 38 years were sourced from World Development Indicators (2016) for the period 1977-2016 to analyse the estimates of the short-run adjustment using error correction mechanism. The result showed that the coefficient of error correction mechanism (ECM ) carried the expected t-1 negative sign and was statistically significant at 5 percent. Moreover, the ECM indicated a feedback of about 54 per cent of the previous year disequilibrium from the long-run elasticity of remittances, population, openness and banking sector development. It was, therefore, recommended, among others, that Nigeria's monetary authorities should expand remittance channels to include bureaux de change and capable microfinance banks to undertake remittance transfers.
References
Abdih, Y., Chami R., Dagher J. and Montiel P. (2012). Remittances and institutions. Are remittances a curse? World Development, 40(4): 657-666.
Abdullaev, R. (2011). Impact of remittances on economic growth in selected Asian and former Soviet Union countries. MSc thesis, Lund University School of Economics and Management.
Adam, G.S. (1992). Technical workshop on time series econometrics. Lecture notes.
Adelman, I. and Taylor, J.E. (1990). Is structural adjustment with a human face possible? The case of Mexico. Journal of Development Studies, 26: 387-407.
Akinpelu, Y.A., Ogunbi O.J., Bada O.T. and Omojola O.S. (2013). Effect of remittance inflows on economic growth of Nigeria. Developing Countries Studies, 3(3): 113-122.
Atanda, M.S. and Ogboi, C. (2014). Inward remittances and economic growth in sub-Saharan African countries: Application of panel cointegration approach. Research Journal of Finance and Accounting, 5(12):105-115.
Bettin, G. and Zazzaro A. (2012). Remittances and financial development: Substitutes or complements in economic growth? Bulletin of Economic Research, 64(4): 509-536
CBN (2014). Annual Reports and Statement of Accounts. Abuja; CBN.
Das, A. and Chowdhury, M. (2011). Remittances and gross domestic product dynamics in 11 developing countries: Evidence from panel cointegration and pmg techniques. Romanian Economic Journal, 14(14): 3-12.
Engel, R. and Granger, C. (1987). Cointegration and error-correction: Representation estimation and testing. Econometrica, 55(2): 251-76.
Fayissa, B. and Nsiah, C. (2008). The impact of remittances on economic growth and development in Africa. Department of Economics and Finance working paper series. Accessed from www.ideas.repec.org.
Fayissa, B. and Nsiah, C. (2012). Can remittances spur economic growth and development? Evidence from Latin American countries (LACs). Middle Tennessee SU, Department of Economics and Finance Working Paper.
Fuller, W.A. (1976). Introduction to Statistical Time Series. New York; John Wiley and Sons.
Giuliano, P. and Ruiz-Arranz, M. (2005). Remittances, financial development and growth. Journal of Development Economics, 90(1): 144-152.
Glytsos, N. (2005). The contribution of remittances to growth. A dynamic approach and empirical analysis. Journal of Economic Studies, 32(6): 468-496.
Hatemi, J.A. (2008). Tests for cointegration with two unknown regime shifts with an application to financial market integration. Empirical Economics, 35: 497-505.
Igbal, Z. and Sattar, A. (2005). The contribution of workers' remittances to economic growth in Pakistan. Research Report No. 187, Pakistan Institute of Development Economics, Islamabad.
Jawaid, S.T. and Raza S.A. (2012). Workers' remittances and economic growth in China and Korea: An empirical analysis. Journal of Chinese Economic and Foreign Traded Studies, 5(3): 185-193.
Johnansen, S. (1990). Estimation and hypothesis testing of cointegrating vectors in Gaussian vector autoregressive models. Econometrica, 59: 1551-1580.
Kanu, S.I. and Ozurumba, B.A. (2013). Migrant's remittances and economic growth in sub-Saharan Africa: Evidence from Nigeria, Ghana and South Africa. Interdisciplinary Journal of Contemporary Research in Business, 4(10):537-550.
Mahedi, M. (2014). Workers' remittance inflow, financial development and economic growth: A study on Bangladesh. International Journal of Economics and Finance, 6(8).
Mordi, C.N.O. (2006). Challenges of exchange rate volatility in economic management in Nigeria. Central Bank of Nigeria Bullion, 30(3): 17-25.
Mundaca, G.B. (2009). Can remittances enhance economic growth? The role of financial market development. University of Oslo Mimeo.
Oyejide, O.O. (2016). Does remittances and output growth improve household welfare in Nigeria? Journal of Economics and Sustainable Development, 7(3): 44- 55.
Raju, J.S., Markus H. and Kyung-Woo H. (2010). Determinants and macroeconomic impact of remittances in sub-Saharan Africa. IMF Working Paper WP/09/216.
Seddighi, H.R., Lawler, K.A. and Katos A.V. (2000). Econometrics: A practical approach. New York; Rutledge.
Shahbaz, M., Jamshaid, R. and Waqar, H. (2008). Do foreign remittances reduce government spending? International Research Journal of Econs., 14:239-253.
Sharaf, M.F. (2014). The remittances-output nexus: Empirical evidence from Egypt. Economics Research International, 10.
Shimul S.N. (2013). Remittances and economic development: Evidence from Bangladesh using unrestricted error correction model and Engle–Granger cointegration approach. Business and Economic Horizons, 10(1).
Stark, O. (1991). The Migration of Labour. Cambridge; Cambridge University Press.
Stark, O. and Bloom, D.E. (1985). The new economics of labour migration. American Economic Review, 75(2): 173-178.
Sufian, E.M. (2009). Workers' remittances and growth in MENA labour exporting countries. International Network for Economic Research Working Paper.
Taylor, J.E. (1999). The new economics of labour migration and the role of remittances in the migration process. International Migration, 37(1): 63-88.
World Bank (2014). World Development Indicators. Washington DC; World Bank.
Ziesemer, T. (2007). Workers remittances and growth: The physical and human capital channels. United Nations University Working paper Series.
Abdullaev, R. (2011). Impact of remittances on economic growth in selected Asian and former Soviet Union countries. MSc thesis, Lund University School of Economics and Management.
Adam, G.S. (1992). Technical workshop on time series econometrics. Lecture notes.
Adelman, I. and Taylor, J.E. (1990). Is structural adjustment with a human face possible? The case of Mexico. Journal of Development Studies, 26: 387-407.
Akinpelu, Y.A., Ogunbi O.J., Bada O.T. and Omojola O.S. (2013). Effect of remittance inflows on economic growth of Nigeria. Developing Countries Studies, 3(3): 113-122.
Atanda, M.S. and Ogboi, C. (2014). Inward remittances and economic growth in sub-Saharan African countries: Application of panel cointegration approach. Research Journal of Finance and Accounting, 5(12):105-115.
Bettin, G. and Zazzaro A. (2012). Remittances and financial development: Substitutes or complements in economic growth? Bulletin of Economic Research, 64(4): 509-536
CBN (2014). Annual Reports and Statement of Accounts. Abuja; CBN.
Das, A. and Chowdhury, M. (2011). Remittances and gross domestic product dynamics in 11 developing countries: Evidence from panel cointegration and pmg techniques. Romanian Economic Journal, 14(14): 3-12.
Engel, R. and Granger, C. (1987). Cointegration and error-correction: Representation estimation and testing. Econometrica, 55(2): 251-76.
Fayissa, B. and Nsiah, C. (2008). The impact of remittances on economic growth and development in Africa. Department of Economics and Finance working paper series. Accessed from www.ideas.repec.org.
Fayissa, B. and Nsiah, C. (2012). Can remittances spur economic growth and development? Evidence from Latin American countries (LACs). Middle Tennessee SU, Department of Economics and Finance Working Paper.
Fuller, W.A. (1976). Introduction to Statistical Time Series. New York; John Wiley and Sons.
Giuliano, P. and Ruiz-Arranz, M. (2005). Remittances, financial development and growth. Journal of Development Economics, 90(1): 144-152.
Glytsos, N. (2005). The contribution of remittances to growth. A dynamic approach and empirical analysis. Journal of Economic Studies, 32(6): 468-496.
Hatemi, J.A. (2008). Tests for cointegration with two unknown regime shifts with an application to financial market integration. Empirical Economics, 35: 497-505.
Igbal, Z. and Sattar, A. (2005). The contribution of workers' remittances to economic growth in Pakistan. Research Report No. 187, Pakistan Institute of Development Economics, Islamabad.
Jawaid, S.T. and Raza S.A. (2012). Workers' remittances and economic growth in China and Korea: An empirical analysis. Journal of Chinese Economic and Foreign Traded Studies, 5(3): 185-193.
Johnansen, S. (1990). Estimation and hypothesis testing of cointegrating vectors in Gaussian vector autoregressive models. Econometrica, 59: 1551-1580.
Kanu, S.I. and Ozurumba, B.A. (2013). Migrant's remittances and economic growth in sub-Saharan Africa: Evidence from Nigeria, Ghana and South Africa. Interdisciplinary Journal of Contemporary Research in Business, 4(10):537-550.
Mahedi, M. (2014). Workers' remittance inflow, financial development and economic growth: A study on Bangladesh. International Journal of Economics and Finance, 6(8).
Mordi, C.N.O. (2006). Challenges of exchange rate volatility in economic management in Nigeria. Central Bank of Nigeria Bullion, 30(3): 17-25.
Mundaca, G.B. (2009). Can remittances enhance economic growth? The role of financial market development. University of Oslo Mimeo.
Oyejide, O.O. (2016). Does remittances and output growth improve household welfare in Nigeria? Journal of Economics and Sustainable Development, 7(3): 44- 55.
Raju, J.S., Markus H. and Kyung-Woo H. (2010). Determinants and macroeconomic impact of remittances in sub-Saharan Africa. IMF Working Paper WP/09/216.
Seddighi, H.R., Lawler, K.A. and Katos A.V. (2000). Econometrics: A practical approach. New York; Rutledge.
Shahbaz, M., Jamshaid, R. and Waqar, H. (2008). Do foreign remittances reduce government spending? International Research Journal of Econs., 14:239-253.
Sharaf, M.F. (2014). The remittances-output nexus: Empirical evidence from Egypt. Economics Research International, 10.
Shimul S.N. (2013). Remittances and economic development: Evidence from Bangladesh using unrestricted error correction model and Engle–Granger cointegration approach. Business and Economic Horizons, 10(1).
Stark, O. (1991). The Migration of Labour. Cambridge; Cambridge University Press.
Stark, O. and Bloom, D.E. (1985). The new economics of labour migration. American Economic Review, 75(2): 173-178.
Sufian, E.M. (2009). Workers' remittances and growth in MENA labour exporting countries. International Network for Economic Research Working Paper.
Taylor, J.E. (1999). The new economics of labour migration and the role of remittances in the migration process. International Migration, 37(1): 63-88.
World Bank (2014). World Development Indicators. Washington DC; World Bank.
Ziesemer, T. (2007). Workers remittances and growth: The physical and human capital channels. United Nations University Working paper Series.
Published
2018-03-01
Section
Articles
