Addressing the effect of workers’ remittance on economic growth: evidence from MENA countries

Purpose – The purpose of this paper is to study the effect of remittances on economic growth inMENA region. More precisely this study tries first to explore the short-run and the long-runrelationship between remittances and economic growth. Second, the authors address how the localfinancial development and institutional environment influence a country’s capacity to take advantagefrom remittances.Design/methodology/approach – The panel data unit-root test as well as the panel dataco-integration is used for the purpose of the long-run remittances growth relationship and the IVtechnique with GMM option is adopted to study the short-run link.Findings – This paper provides empirical evidence that remittances have a positive effect oneconomic growth in the long run and a negative effect in short run. The short-run effect of remittanceson economic growth is conditional. In fact, it depends in the levels of financial development andinstitutional quality, respectively.Practical implications – As practical implications, policy interventions, to improve the functioningof governance institutions, enforcing regulation and political stability, enhancing financial system andsocio-economic environment are also crucial for increasing the benefit effects of remittances.Originality/value – The research is an extension of previous evidence in two ways; the authors haveexamined the long-run and short-run remittances-growth relationship in the first time. In the secondtime, the authors have explored the conditional remittances-growth relationship in MENA countries.Specifically, the authors have examined whether the remittances-growth nexus is affected by financialdevelopment and institutional quality levels in MENA countries