Financial Liberalization and Remittances: Recent Longitudinal Evidence

Arbeitspapier

This paper investigates the impact of financial liberalization on remittances to 84 countries over five-year intervals from 1990-2005 based on the difference-GMM method of Arellano and Bond (1991). We find that various dimensions of financial reform impact remittances differently. Increased economic freedom in the financial sector, captured by absence of direct government control over the allocation of credit, has a positive and immediate impact. Improved robustness of financial markets, captured by the effective and apolitical regulations and other policies that enhance financial markets, has a negative, lagged effect. The net combined impact of these effects suggests that the long-run effect of an across-the-board reform on remittances is slightly negative. Our results suggest that countries using liberalization to cope with external imbalances will find that granting greater financial freedom will help by attracting higher levels of remittances. However, countries using liberalization to reduce their exposure to external risks will find that policies that enhance the robustness of domestic financial markets to be more effective.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 7497

Classification and Topics

• Classification: Wirtschaft ; International Migration ; Economic Development: Human Resources; Human Development; Income Distribution; Migration ; Other Economic Systems: Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
• Subject: remittances ; financial liberalization ; property rights

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bang, James T. ; Mitra, Aniruddha ; Wunnava, Phanindra V.
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/80554
• Last update: 10.03.2025, 11:45 AM CET