Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/80554
Authors: 
Bang, James T.
Mitra, Aniruddha
Wunnava, Phanindra V.
Year of Publication: 
2013
Series/Report no.: 
IZA Discussion Paper 7497
Abstract: 
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.
Subjects: 
remittances
financial liberalization
property rights
JEL: 
F22
O15
P48
Document Type: 
Working Paper

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