Effect of Remittances on Economic Growth of Sub Saharan African Countries

Abstract

This research paper investigate the effect of immigrants ’remittances on economic growth on 36 Sub Saharan Africa countries spanning from 1980-2015. The previous studies are limited to the examination of the effect of remittances based on aggregated data. This work extends these earlier studies by examining the effect of remittances based on temporary and permanent components. System GMM estimation technique was used and the results showed that both remittances from temporary migrants and permanent migrants contribute positively to economic growth but the contribution by temporary migrants is relatively higher. This paper recommends  that policy makers should enhance easy access to foreign currency accounts and foreign currency denominated bonds with permission to repatriate, thereby stimulating additional remittances from  permanent migrants  who are likely to belong to professional and high skilled  categories. In order to maximize the beneficial impacts, temporary migrants’ remittances should be redirected towards productive projects. This may include strengthening of good infrastructure which may promote trade and enable ease of access of services.

Keywords: Economic growth, Remittances, System GMM, Sub Saharan Africa