Abstract:
Given the indisputable roles of remittance and financial development in countries' economic performance, enhancing the nexus between the two variables has become pertinent. The remittance-financial development literature has surged, with a growing argument that making the relationship work is conditioned on mediating roles of certain economic indicators. Despite the overwhelming evidence of the transformative roles of digital technology, the assessment of its possible mediating role in the remittance-financial development nexus is lacking in the literature. Hence, using pooled data of 35 Sub-Saharan African (SSA) countries sourced from the World Bank's Development Indicators, this study examined the mediating effect of digital technology in the relationship between remittance inflows and financial development. Using two indicators of ICT-fixed broadband and mobile cellular subscription-the results of the generalized method of moment analysis suggest that digital technology spurs remittance inflows to promote financial development in SSA. The results are consistent for both measures. These findings imply that remittance and digital technology are complementary in promoting financial development in the sub-region. Based on these outcomes, the study therefore advances the enactment of policies aimed at fostering diffusion of digital technology and achieving the sustainable development goal's recommendation of lower transaction cost of remittances.
