KTH/CESIS Working Paper Series in Economics and Institutions of Innovation
Per-Olof Bjuggren, James Dzansi
Remittances and Investment
() and Ghazi Shukur
Abstract: This paper studies the impact of remittances on
investment. Workers’ remittances to developing countries have grown to be
an important source of financing, amounting to around $300 billion a year.
The funds are used for both consumption and investment in the home
countries of the migrants. The importance of financial and institutional
framework in the receiving countries and how they interact with remittances
is stressed. Data on remittance flow to 79 developing countries during
1995-2005 is used. Dynamic panel data approach is applied for this purpose.
The results reveal that remittances, high quality institutional framework
and well developed credit market increase investment. However, it is also
found that the marginal importance of remittances as a financial source for
investment decreases with improved institutional framework and a more
developed credit market.
Keywords: Remittances; Investment; Institutions; Financial Development; Dynamic Panel Data; (follow links to similar papers)
JEL-Codes: C23; E22; F24; G21; I38; O16; O17; (follow links to similar papers)
26 pages, February 11, 2010
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