Impact of remittances on private sector credit in the pacific island countries

We examine the effect of remittances on private sector credit in the Pacific Islandcountries (PICs) using the data from 58 developing countries from 2004 to 2016. Theanalysis provides strong evidence that the effect of remittance inflows on privatesector credit for PICs is positive and higher than that for other developing countries.In addition, the per capita gross domestic product, official development assistance,the number of bank branches, and institutional quality are also positively associatedwith private sector credit in PICs, while the Consumer Price Index is negativelyassociated with private sector credit. These results have important implications for thedevelopment of financial sector in PICs