Remittances, Financial Development and Poverty Reduction in Sub-Saharan Africa

Articles in Press

Document Type : Research Paper

Authors

1 Department of Economics, Adeyemi Federal University of Education, Ondo, Nigeria

2 Department of Economics, Obafemi Awolowo University, Ile‑Ife, Nigeria

Abstract

This study specifically investigates the direct effect of financial development and remittances as well as the interaction effect of remittances and financial development (FD) on poverty reduction in various income groups in sub-Saharan Africa. The study employed the Panel ARDL model on data from 31 sub-Saharan countries during the period 1990-2020. The study found that in the long-run, both remittances and FD contribute to poverty reduction in sub-Saharan Africa, middle-income and low-income groups within the region. The study also found that the interaction of remittances and FD does not contribute to the poverty alleviation process. In the short-run, both remittances and FD fail to enhance poverty reduction in the region and among the income groups. Likewise, the interaction between remittances and FD does not contribute to poverty reduction in the region and within the income groups. The study found that the levels of income play no role in the relationship between remittances, financial development and economic growth but it has little effect in the short-run. There is a need to make financial institutions more efficient in promoting the inflow of remittances through the formal channel by easing and reducing the cost of the transaction of remittances.

Keywords

Iranian Economic Review

Articles in Press, Accepted Manuscript
Available Online from 15 May 2023

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