Financial liberation and international remittances in Sub-Saharan Africa : a panel data analysis
Thesis (PhD)--Stellenbosch University, 2014.
ENGLISH ABSTRACT: This study analyses the implications of financial liberalisation programme for international remittance inflows with regard to the macroeconomic determinants and also the implications of remittances for economic growth and development in sub-Saharan Africa (SSA) between 1980 and 2009. The methodological approach to the analytical framework of this study is based on the hypothesis that financial liberalisation causes higher inflows of international migrant remittances through official channels to augment the scarce domestic financial resources, and to stimulate economic growth for sustainable development in capital-constrained SSA. Prior to the macroeconometric analyses, the study addressed definitional and measurement issues on international remittances and financial liberalisation, and provided an overview of the macroeconomic policy environment in post-independent SSA, as well as the magnitude and the trends in remittances received by SSA relative to other developing economies. First, the system Generalised Method of Moment (GMM) for dynamic panel-data estimation was used to determine the macroeconomic factors responsible for the changing trends in remittance inflows. Then an inquiry into the impact and causal effects of financial liberalisation on international remittance inflows in SSA following the static panel-data modelling and panel Granger non-causality estimation procedures was undertaken. Following this, the system GMM was further employed to examine the impact of remittances on long-run economic growth, and the effects of remittance inflows on economic development in SSA. Essentially, the economic development indicators considered in this study are poverty, income inequality, labour market outcomes, human capital development, and financial development. It is revealed in this study that the most appropriate measure of international migrant remittances is the sum of “workers‟ remittances” and “compensation of employees” excluding “migrant transfers”. Using remittances per capita, which the study found to be the best proxy for remittances per migrant rather than the commonly used remittances as a percentage of GDP, it is shown that SSA is the least recipient of official migrant remittances in the world, with no SSA country receiving remittances worth US$1 per day. This study further establishes that the macroeconomic factors that influence remittance inflows in SSA have varying rather than static impact in response to changing macroeconomic policy environment. Also, macroeconomic factors have different influences on attracting remittances from abroad in relation to migrant duration status – permanent or temporary. Although financial liberalisation Granger-causes international remittances, not sufficient evidence exists that a significant proportion of the official remittances received in SSA passes through the banking system. Besides, the extent to which financial liberalisation can Granger-cause and/or positively impact on international remittance inflows in SSA is directly and ultimately conditional to the macroeconomic fundamentals of the remittance-receiving SSA country. It was also found out that generally, international migrant remittances propel higher economic growth in SSA, with greater impact on SSA countries with relatively higher growth rates. International remittance inflows have significant positive developmental impact, with no sufficient evidence of moral hazard effects. Overall, international remittances contribute to reducing poverty and unemployment but not necessarily income inequality and, at worse, remittances have no significant impact on labour productivity and participation in SSA. Higher remittance inflows promote human welfare, educational attainment, life expectancy, and financial development in SSA. With the exception of educational attainment, the developmental effects of remittances vary across countries, depending upon the level of economic development.