Remittance inflows in a digital economy: A Sub-Saharan African experience

Olufunmilayo Olayemi Jemiluyi, Leward Jeke

Article ID: 2838
Vol 8, Issue 4, 2024

VIEWS - 227 (Abstract) 167 (PDF)

Abstract


The undeniable importance of migrants’ remittances to the welfare of developing countries was again demonstrated during the COVID-19 pandemic. This has therefore led to a significant shift in attention to the relevance of remittances and has likewise spurred research interest in factors that motivate the inflows of remittances. However, in spite of the increasing recognition of the roles of digital technology in the macroeconomic performance of developed and developing economies alike, empirical analysis of its possible impacts on remittance inflows has not been well explored in the literature. Therefore, pooling the annual data of 35 sub-Saharan African (SSA) countries from 2011 to 2020, this study investigates the nexus between digital technology and remittance inflows within the generalized method of moments (GMM) framework. Using two measures of digital technology infrastructure—internet usage and mobile cellular subscription—the study finds a positive relationship between digital technology and remittances inflow. In addition, the findings indicate that the magnitude of the effect is relatively higher for internet usage. The study thus shows that the increased rate of remittance mobilization constitutes a significant pathway through which digital technology impacts the economies of the SSA region. Moreover, it offers further insight on the importance of digital technology in the socioeconomic development of developing countries. From a policy standpoint, governments and policymakers in SSA countries should intensify efforts to promote the diffusion and penetration of digital infrastructure.


Keywords


migrant remittances; digital technology; ICT; Sub-Saharan Africa, developing countries

Full Text:

PDF


References


Acosta, P. A, Baerg, N. R., Mandelman, F. S. (2009). Financial development, remittances, and real exchange rate appreciation. Economic Review 94. Federal Reserve Bank of Atlanta, Atlanta, GA.

Adeleye, N., & Eboagu, C. (2019). Evaluation of ICT development and economic growth in Africa. NETNOMICS: Economic Research and Electronic Networking, 20(1), 31–53. https://doi.org/10.1007/s11066-019-09131-6

Adenutsi, D., Ahortor, C. (2021). Macroeconomic determinants of remittance flows to sub-Saharan Africa. Working Papers 415, African Economic Research Consortium (AERC).

Aggarwal, R., Demirgüç-Kunt, A., & Pería, M. S. M. (2011). Do remittances promote financial development? Journal of Development Economics, 96(2), 255–264. https://doi.org/10.1016/j.jdeveco.2010.10.005

Ahiawodzi, A. K. (2012). Macroeconomic determinants of private inward remittances in Ghana: An empirical study. Journal of Business Research, 6(1).

Ahmed, Z., & NaRanong, A. (2023). The Effects of ICT/e-Government on Migrant Workers' Remittance Inflows in Bangladesh: An Empirical Study. Journal of Sustainable Development, 16(1), 53. https://doi.org/10.5539/jsd.v16n1p53

Anzoategui, D., Demirgüç-Kunt, A., & Martínez Pería, M. S. (2014). Remittances and Financial Inclusion: Evidence from El Salvador. World Development, 54, 338–349. https://doi.org/10.1016/j.worlddev.2013.10.006

Arapi-Gjini, A., Möllers, J., & Herzfeld, T. (2020). Measuring Dynamic Effects of Remittances on Poverty and Inequality with Evidence from Kosovo. Eastern European Economics, 58(4), 283–308. https://doi.org/10.1080/00128775.2020.1720517

Arellano, M., & Bond, S. (1991). Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations. The Review of Economic Studies, 58(2), 277. https://doi.org/10.2307/2297968

Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68(1), 29–51. https://doi.org/10.1016/0304-4076(94)01642-d

Asongu, S. A., & Odhiambo, N. M. (2020). Remittances, the diffusion of information and industrialisation in Africa. Contemporary Social Science, 15(1), 98–117. https://doi.org/10.1080/21582041.2019.1618898

Asquith, P., & Opoku-Owusu, S. (2020). Diaspora Investment to Help Achieve the SDGs in Africa: Prospects and Trends. Foreign Direct Investment Perspective through Foreign Direct Divestment. https://doi.org/10.5772/intechopen.93129

Azizi, S. (2021). The impacts of workers’ remittances on poverty and inequality in developing countries. Empirical Economics, 60(2), 969–991. https://doi.org/10.1007/s00181-019-01764-8

Barajas, A., Chami, R., Ebeke, C., & Oeking, A. (2018). What’s different about monetary policy transmission in remittance-dependent countries? Journal of Development Economics, 134, 272–288. https://doi.org/10.1016/j.jdeveco.2018.05.013

Bersch, J., Perez Ruiz, E., Yakhshilikov, Y., François Clevy, J., & Muhammad, N. (2021). Fintech Potential for Remittance Transfers: A Central America Perspective. IMF Working Papers, 2021(175), 1. https://doi.org/10.5089/9781513585420.001

Bolarinwa, T. S., Akinbobola, T. O. (2021). Remittances-financial development nexus: Causal evidence from four African countries. Ilorin Journal of Economic Policy, 8(1), 1-17.

Drid, J., Gursoy, T., Perez-Saiz, H., Bari, M. (2019). The impact of remittances on economic activity: The importance of sectoral linkages. Working Paper19/175 International Monetary Fund.

Efobi, U., Asongu, S., Okafor, C., Tchamyou, V., & Tanankem, B. (2019). Remittances, finance and industrialisation in Africa. Journal of Multinational Financial Management, 49, 54–66. https://doi.org/10.1016/j.mulfin.2019.02.002

Ekanayake, E. M., & Moslares, C. (2020). Do Remittances Promote Economic Growth and Reduce Poverty? Evidence from Latin American Countries. Economies, 8(2), 35. https://doi.org/10.3390/economies8020035

Elmi, M. A., & Ngwenyama, O. (2020). Examining the use of electronic money and technology by the diaspora in international remittance system: A case of Somali remittances from Canada. The Electronic Journal of Information Systems in Developing Countries, 86(5). https://doi.org/10.1002/isd2.12138

Emara, N., & Zhang, Y. (2021). The non-linear impact of digitization on remittances inflow: Evidence from the BRICS. Telecommunications Policy, 45(4), 102112. https://doi.org/10.1016/j.telpol.2021.102112

Ezeoha, A. E. (2013). Financial Determinants of International Remittance Flows to the Sub‐Saharan African Region. International Migration, 51(s1). Portico. https://doi.org/10.1111/imig.12061

Francois, J. N., Ahmad, N., Keinsley, A., Nti-Addae, A. (2022). Remittances increase GDP with potential differential impacts across countries. Available online: https://blogs.worldbank.org/peoplemove/remittances-increase-gdp-potential-differential-impacts-across-countries (accessed on 2 June 2023).

Gascón, P., Larramona, G., & Salvador, M. (2023). The impact of digitalisation on remittances. Evidence from El Salvador. Telecommunications Policy, 47(4), 102500. https://doi.org/10.1016/j.telpol.2023.102500

International Monetary Fund. (2021). Special series on COVID-19. Remittances in sub-Saharan Africa: An update. Available online: https://www.imf.org/en-special-series-on-covid-19-remittances-in-sub-saharan-africa-an-update%20(2).pdf (accessed on 2 June 2023).

Jemiluyi, O. O., & Jeke, L. (2023a). How Catalytic Is Digital Technology in the Nexus between Migrants’ Remittance and Financial Development in Sub-Saharan African Countries? Economies, 11(3), 74. https://doi.org/10.3390/economies11030074

Jemiluyi, O. O., & Jeke, L. (2023b). Tax revenue mobilization effort in Southern African Development Community (SADC) bloc: Does ICT matter? Cogent Economics & Finance, 11(1). https://doi.org/10.1080/23322039.2023.2172810

Jijin, P., Mishra, A. K., & Nithin, M. (2022). Macroeconomic determinants of remittances to India. Economic Change and Restructuring, 55(2), 1229–1248. https://doi.org/10.1007/s10644-021-09347-3

Kunze, J. (2017). Digital remittances and global financial health. World Bank.

Laniran, T., & Adeniyi, D. (2015). An Evaluation of the Determinants of Remittances: Evidence from Nigeria. African Human Mobility Review, 1(2). https://doi.org/10.14426/ahmr.v1i2.739

Lewan, M. (2018). The Internet as an enabler of FinTech. The Rise and Development of FinTech, 190–204. https://doi.org/10.4324/9781351183628-11

Mallick, H, Mahalik, M. (2015). Motivating factors of remittances inflows into developing Asian economies. The Singapore Economic Review, 61(04), 1550063. https://doi.org/10.1142/s0217590815500630

Mamonov, S. (2020). The Role of Information Technology in Fintech Innovation: Insights from the New York City Ecosystem. Responsible Design, Implementation and Use of Information and Communication Technology, 313–324. https://doi.org/10.1007/978-3-030-44999-5_26

Molapo, S. (2022). Determinants Of remittances in selected Southern African Countries. Macroeconomic and Financial Management Institute of Eastern and Southern Africa. Zimbabwe. Available online: https://policycommons.net/artifacts/2620685/determinants-of-remittances-in-selected-southern-african-countries/3643357/ (accessed on 2 June 2023).

Nicoli, M, Ahmed, U. (2019). How digital remittances can help drive sustainable development. World Bank. Available online: https://blogs.worldbank.org/psd/how-digital-remittances-can-help-drive-sustainable-development (accessed on 2 June 2023).

Okon, E. O. (2022). Interactive effect of exchange rates with remittance on informal remittance channel: A dynamic analysis. Journal of Business, Economics and Finance, 11(3), 110-12. https://doi.org/10.17261/pressacademia.2022.1631

Omon, I. J. (2021). Determinants of Migrants Remittances in the West Africa Monetary Zones (WAMZ): An Econometric Evaluation. Kardan Journal of Economics and Manangement Sciences, 4(1), 39–56. https://doi.org/10.31841/kjems.2021.10

Pandikasala, J., Vyas, I., & Mani, N. (2020). Do financial development drive remittances? Empirical evidence from India. Journal of Public Affairs, 22(1). Portico. https://doi.org/10.1002/pa.2269

Raithatha, R., Farooq, S., Sharma, A. (2021). Using mobile technology to improve remittances to the Pacific. Global System for Mobile Communication Association. (GSMA). Available online: https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2021/07/CIU_PacificRemittances_R_WebSingles1.pdf (accessed on 2 June 2023).

Rana, R. H., & Hashmi, R. (2015). The Determinants of Worker Remittance in Terms of Foreign Factors: The Case of Bangladesh. Studies in Business and Economics, 10(3), 81–93. https://doi.org/10.1515/sbe-2015-0038

Ranathunga, P. B. (2018). The determinants of remittance inflows and its usage in the rural communities: Special reference to rural-to-urban labour migration in Sri Lanka. International Journal of Development and Sustainability, 7(3), 1238-1249.

Rivera, J. P. R., & Tullao, T. S. (2020). Investigating the link between remittances and inflation: evidence from the Philippines. South East Asia Research, 28(3), 301–326. https://doi.org/10.1080/0967828x.2020.1793685

Roodman, D. (2009a). How to xtabond2: An introduction to difference and system GMM in Stata. Stata Journal, 9(1), 86–136.

Roodman, D. (2009b). A note on the theme of too many instruments. Oxford Bulletin of Economics & Statistics, 71(1), 135-158.

Singh, R., Haackerb, M., Lee, K., Le Goff, M. (2010). Determinants and macroeconomic impact of remittances in sub-Saharan Africa. Journal of African Economies.

Simpson, N. B., Sparber, C. (2020). Estimating the determinants of remittances originating from US households using CPS data. Eastern Economic Journal, 46, 161–189.

Tsaurai, K., Maseko, C. M. (2020). An empirical study of the determinants of remittances in transitional economies. Oeconomica, 16(3), 181-199.

UNESCO Courier. (2021). Mobile phones: An indispensable tool for migrant. Available online: https://en.unesco.org/courier/2021-4/mobile-phones-indispensable-tool-migrants (accessed on 2 January 2024).

United Nations. (2022). International Day of Family remittance June 16. Available online: https://www.un.org/en/observances/remittances-day (accessed on 2 January 2024).

World Bank. (2011). Diaspora for development in Africa. Available online: https://documents1.worldbank.org/curated/en/389011468191676942/pdf/616380PUB0Dias1351B0Extop0ID0182580.pdf (accessed on 2 January 2024).

World Bank. (2020). Atlas for sustainable development goals. Remittances: A lifeline for many economies. Available online: https://datatopics.worldbank.org/sdgatlas/archive/2020/ (accessed on 2 January 2024).

World Bank. (2021). Defying predictions, remittance flows remain strong during COVID-19 crisis. Available online: https://www.worldbank.org/en/news/press-release/2021/05/12/defying-predictions-remittance-flows-remain-strong-during-covid-19-crisis (accessed on 2 January 2024).

Yoshino, N., Taghizadeh-Hesary, F., & Otsuka, M. (2020). Determinants of international remittance inflow in Asia-Pacific middle-income countries. Economic Analysis and Policy, 68, 29–43. https://doi.org/10.1016/j.eap.2020.08.003




DOI: https://doi.org/10.24294/jipd.v8i4.2838

Refbacks

  • There are currently no refbacks.


Copyright (c) 2024 Olufunmilayo Olayemi Jemiluyi, Leward Jeke

License URL: https://creativecommons.org/licenses/by/4.0/

This site is licensed under a Creative Commons Attribution 4.0 International License.