Remittances and Financial Development in Latin America and the Caribbean Countries: A Dynamic Approach

Abstract

Despite the importance of remittances in total international flows, the conclusion of the studies on the relationship between remittances and financial development, is still not completely unanimous, particularly in Latin America and the Caribbean. However, financial development matters for growth and poverty alleviation and financial inclusion have many beneficial effects for households. We examine the relationship between remittances and financial sector development with several dynamic panel data methods. We find a positive, significant, and robust bidirectional link between remittances and financial development for the panel of 32 countries.