Do Workers’ Remittances Promote Financial Development?

Workers' remittances to developing countries have become the second largest type of flows after foreign direct investment. The authors use data on workers' remittance flows to 99 developing countries from 1975-2003 to study the impact of remittances on financial sector development. In part...

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Bibliographic Details
Main Authors:	Aggarwal, Reena, Demirgüç-Kunt, Asli, Martinez Peria, Maria Soledad
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ABSOLUTE TERMS ACCOUNTING ADVERSE EFFECT AGGREGATE LEVEL BALANCE OF PAYMENT BALANCE OF PAYMENT STATISTICS BALANCE OF PAYMENTS BALANCE OF PAYMENTS STATISTICS BANK DEPOSITS BANK LENDING BANKING SECTOR CAPITAL ACCOUNT CAPITAL ACCOUNT LIBERALIZATION CAPITAL FLOWS CAPITAL INFLOWS CENTRAL BANKS COMMERCIAL BANKS COMPENSATION OF EMPLOYEES COMPETITIVENESS COUNTRY CHARACTERISTICS COUNTRY LEVEL COUNTRY SIZE COUNTRY SPECIFIC CREDIT MARKET CREDITOR RIGHTS CROSS COUNTRY CROSS COUNTRY EVIDENCE CURRENT ACCOUNT DATA ON REMITTANCES DEPENDENT VARIABLE DEPOSIT MONEY DEPOSIT MONEY BANKS DEPOSITS DESCRIPTIVE STATISTICS DEVELOPED COUNTRIES DEVELOPING COUNTRIES DEVELOPMENT BANK DEVELOPMENT ECONOMICS DEVELOPMENT IMPACT OF REMITTANCES DEVELOPMENT INDICATORS DOMESTIC FINANCIAL LIBERALIZATION DOMESTIC FINANCIAL SYSTEMS DOMESTIC INTEREST RATES ECONOMETRICS ECONOMIC CONDITIONS ECONOMIC DEVELOPMENT ECONOMIC DOWNTURNS ECONOMIC FUNCTIONS ECONOMIC GROWTH ECONOMIC IMPACT ECONOMIC OUTLOOK ECONOMIC PERFORMANCE EDUCATIONAL ATTAINMENT EFFECT OF REMITTANCES EMIGRATION EMPIRICAL RESULTS ENTREPRENEURSHIP ERROR TERM ERROR TERMS ESTIMATION TECHNIQUES EVOLUTION OF REMITTANCES EXCHANGE ARRANGEMENTS EXCHANGE RATE EXCHANGE RATE REGIMES EXCHANGE RATES EXCHANGE RESTRICTIONS EXPLANATORY VARIABLES EXPORTS EXTERNAL FINANCE FINANCE LITERATURE FINANCIAL CRISES FINANCIAL DEPENDENCE FINANCIAL DEPTH FINANCIAL DEVELOPMENT FINANCIAL ECONOMICS FINANCIAL FLOWS FINANCIAL FRAGILITY FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIATION FINANCIAL LIBERALIZATION FINANCIAL MANAGEMENT FINANCIAL MARKETS FINANCIAL PRODUCTS FINANCIAL REFORM FINANCIAL SECTOR FINANCIAL SECTOR DEVELOPMENT FINANCIAL SECTOR PERFORMANCE FINANCIAL SYSTEM FINANCIAL SYSTEMS FIXED COSTS FIXED EFFECTS FLOWS FOREIGN DIRECT INVESTMENT FORMAL REMITTANCES GDP GDP DEFLATOR GDP PER CAPITA GROWTH RATE HOUSEHOLD DATA HUMAN CAPITAL IMPACT OF REMITTANCES INCOME INCREASE IN REMITTANCES INFLATION INFLATION RATE INFORMAL FLOWS INFORMAL REMITTANCES INTEREST RATE INTEREST RATE CONTROLS INTEREST RATES INTERNATIONAL FINANCIAL STATISTICS INTERNATIONAL MIGRATION LAGGED DEPENDENT LAGGED VALUES LIQUID ASSETS LIQUID LIABILITIES LIQUIDITY LIQUIDITY CONSTRAINTS LOANABLE FUNDS MIGRANT REMITTANCES MIGRANT TRANSFERS MIGRANT WORKERS MIGRANTS MIGRANTS SENDING REMITTANCES MIGRATION MIGRATION DATA MONETARY ECONOMICS MONEY TRANSFER MONEY TRANSFER COMPANIES MONEY TRANSFER OPERATORS MULTIPLE EXCHANGE RATE MULTIPLE EXCHANGE RATES NEGATIVE IMPACT 0 HYPOTHESIS POLICY ISSUES POLICY RESEARCH POLITICAL ECONOMY POST OFFICES POVERTY GAP POVERTY REDUCING POVERTY REDUCTION PRIVATE CREDIT PRIVATE SECTOR PUBLIC POLICY REAL GDP RECIPIENT COUNTRIES RECIPIENTS OF REMITTANCES REDUCING POVERTY REMITTANCE REMITTANCE DATA REMITTANCE FLOWS REMITTANCE MARKET REMITTANCE RECEIVING REMITTANCE RECEIVING COUNTRIES REMITTANCE RECIPIENTS REMITTANCE TRANSFER REMITTANCES REMITTANCES FLOWS RESTRICTIONS ON CAPITAL ACCOUNT TRANSACTIONS RURAL AREAS SAVINGS SEND MONEY SIGNIFICANT EFFECT SIGNIFICANT IMPACT STOCK MARKETS TRANSACTION COSTS TRANSFER PROCESS TRANSFER SERVICES UNEMPLOYMENT UNEMPLOYMENT RATE UNRECORDED REMITTANCES USE OF REMITTANCES VOLUME OF REMITTANCE FLOWS WAGES WORKERS REMITTANCES WORLD INCOME DISTRIBUTION
Online Access:	http://documents.worldbank.org/curated/en/2006/07/6887560/workers-remittances-promote-financial-development http://hdl.handle.net/10986/8418

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Summary:	Workers' remittances to developing countries have become the second largest type of flows after foreign direct investment. The authors use data on workers' remittance flows to 99 developing countries from 1975-2003 to study the impact of remittances on financial sector development. In particular, they examine whether remittances contribute to increasing the aggregate level of deposits and credit intermediated by the local banking sector. This is an important question considering the extensive literature that has documented the growth-enhancing and poverty-reducing effects of financial development. The findings provide strong support for the notion that remittances promote financial development in developing countries.

Do Workers’ Remittances Promote Financial Development?

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