Remittances and Value Added across Economic sub-sectors in Sub-Saharan Africa

Abstract

This research assesses the relevance of enhancing remittances on value added across economic sectors in sub-Saharan Africa for the period 1980 to 2014 using the Generalised Method of Moments. First, no significant net effects on added value to the agricultural sector are apparent. Second, enhancing remittances engenders a positive net effect on added value to the manufacturing sector. Third, there are negative net effects on added value to the service sector. Given that the unfavourable net incidence of remittances to the service sector is associated with a positive marginal or conditional effect, the analysis is extended by computing thresholds at which remittances induce net positive effects on added value to the service sector. The extended analysis shows that a remittance threshold of 48.5% of GDP is the critical mass needed for further enhancement of remittances to engender positive net effects on value added to the service sector.

Causal Relationship Between Remittances and Industry Value: A Case of Selected Sub-Saharan Africa Countries

“…These results are similar to those by Oyalami and Ogundipe (2020) who found a significant effect of remittance on industry value. Moreover there is vast literature supporting the relationship between remittances and industry value (Ofori and Grechyna, 2021;Asongu and Odhiambo, 2021;Anarfo et al, 2020;Mohammed et al, 2022).…”

“…From Table 1 it can be noted that remittances facilitate financial development, due to the positive association that exists between remittances and savings which by extension increases the bank credit. Studies conducted by Ofori and Grechyna (2021), Asongu and Odhiambo (2021), Anarfo et al (2020) all came to the conclusion that there is a clear connection between remittances and the advancement of a country's financial system. In a more precise sense, Ofori and Grechyna (2021) stated that remittances assist financial growth.…”

Impact of Remittance Inflows on Selected South-East European Economies: A Panel Auto-Regressive Distributed Lag Approach

“…The different base models, approaches to measuring remittance inflows and economic growth as well as different geographical regions around the globe are likely causes of why there are so many significant differences between how remittance inflows impact economic growth. Broadly, the literature examined can be subdivided into three separate categories: 1. the authors who believe that remittances inadvertently hamper economic growth [5,6,17,18], 2. the authors who believe that remittances help promote economic growth and alleviate poverty [7,19], 3. authors who find no statistically significant relationship between remittances and economic growth or find that the impact of remittance inflows may be different across different regions or countries [9,20,21].…”

“…A panel of 25 sub-Saharan economies was examined [21] and complementary finding to those of [10] were found. The authors have emphasized that one of the problems in dealing with the study of remittance inflows is a lack of possible explanatory exogenous variables and also implemented a GMM approach.…”