Inward Remittances and Economic Growth in Sub-Saharan African Countries: Application of Panel Cointegeration Approach

Abstract

Remittance inflow into Sub-Saharan Africa region has increased substantially, even above other foreign capital flows like Foreign Direct Investment (FDI) and other Development Assistance (ODA). Empirical evidence on the impact of remittances on output growth in the region is rather scarce. Few studies on this topic produced mixed results probably due to their inability to identify the channels through which remittances might affect economic growth. This study then investigates the impact of remittances on output growth in sub Saharan Africa, looking specifically the financial development and investment channels. Panel data estimation techniques were adopted in the analysis, followed by the stability tests. The findings from the study indicate that remittance spur growth in the Sub-Saharan African region and that financial development and investment played pivotal role in the remittance output growth nexus.

Keywords: Remittances, economic growth, financial development, foreign direct investment, panel data analyses.