Abstract:
This paper examines the impact of remittances on output volatility through the channel
of financial development using data for 158 countries from 1971 to 2017. We estimate the
role of financial development by looking at multiple features of financial institutions,
such as depth, access and efficiency. We used multiple indicators as a proxy of financial
development in the remittance-output volatility nexus and employed System
Generalized Method of Moments (GMM) and Fixed Effects Instrumental Variable (FE IV) models. Our findings are robust across specifications. We find a significant positive
impact of all indicators of financial development on the remittance-output volatility
relationship. The findings suggest that multifaceted financial development is needed for
the effective management of output volatility through remittance inflows.
