Financial Development, Remittances and Real sector in Sub-Sahara African Countries

Articles in Press

Document Type : Research Paper

Authors

1 Department of Economics, Faculty of Social Sciences, Obafemi Awolowo University, Ile-Ife, Nigeria

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

10.22059/ier.2024.372067.1007929

Abstract

This study examined how financial development influences the relationship between remittances and the real sector in sub-Saharan Africa. We use system GMM regression estimation on annual data, which covers the period 1990–2021, from 32 sub-Saharan African countries. This study used three indicators of financial development and also constructed a composite index for financial development. Also, four measures of the real sector, namely agriculture value-added, service value-added, total factor productivity, and industrial value-added were used. The system GMM results show that domestic credit to the private sector and interest rate spread contribute to the agricultural sector, while liquid liabilities and the financial development index promote the industrial sector. The study found that remittances promote the industrial sector. Also, financial development and remittances complement each other to promote total factor productivity while acting as substitutes in the industrial sector. The agricultural and service sectors do not respond to the interaction of financial development and remittances.

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Iranian Economic Review

Articles in Press, Accepted Manuscript
Available Online from 02 October 2024

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