Remittances and Financial Development: Substitutes or Complements in Economic Growth?

28 Pages Posted: 31 Mar 2017

See all articles by Giulia Bettin

Giulia Bettin

Università Politecnica delle Marche - Department of Economics

Alberto Zazzaro

Polytechnic University of Marche - Faculty of Economics

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Date Written: October 2012

Abstract

Recent studies indicate that the effect of migrants’ remittances on the economic growth of receiving countries depends negatively on the level of development of the domestic financial sector. In this paper, we introduce a new indicator of financial development to measure the efficiency of the domestic banking system, and find the existence of complementarity between remittances and bank efficiency in economic growth, such that remittances promote growth only in countries whose banks function well. This result is robust to controls for other traditional measures of financial depth and institutional quality indicators.

Keywords: bank efficiency, economic growth, financial development, migrants’ remittances

JEL Classification: F22, F43, O16

Suggested Citation

Bettin, Giulia and Zazzaro, Alberto, Remittances and Financial Development: Substitutes or Complements in Economic Growth? (October 2012). Bulletin of Economic Research, Vol. 64, Issue 4, pp. 509-536, 2012, Available at SSRN: https://ssrn.com/abstract=2943730 or http://dx.doi.org/10.1111/j.1467-8586.2011.00398.x

Giulia Bettin (Contact Author)

Università Politecnica delle Marche - Department of Economics ( email )

Piazzale Martelli 8
Ancona, 18039
Italy
+39 071 2207079 (Phone)
+39 071 2207102 (Fax)

Alberto Zazzaro

Polytechnic University of Marche - Faculty of Economics ( email )

Piazzale Martelli, 8
60121 Ancona
Italy

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