The Effects of Remittances on Economic Growth in West Africa

Abstract

This paper is an attempt to investigate the cointegration and Granger causal relationship between remittances and economic growth in West Africa with special reference to Burkina-Faso, Ghana, Guinea, Guinea-Bissau, Mali, Nigeria, and Togo. Different from limited existing countries studies in west Africa, an advanced panel econometric methodology such as dynamic Panel data techniques, considers the question of remittances on economic growth in West Africa. Our results suggest that remittances on economic growth in West Africa exert a positive and significant impact. Furthermore, a positive relationship between remittance, real effective exchange rate, trade openness, investment on economic growth was detected. Thereby it is important to examine the causal effects of both remittances and economic growth in West Africa, which conclude the existence of a short-term relationship between remittance and economic growth in West Africa. The above findings and conclusions informed the following recommendations: There is a need for carefulness in the management of funds sent home by migrants. Such monies are expected to be guided into productive ventures and not for wastefulness. To earn the full benefits of improved migrant’s remittances, West Africa must create an investment climate that is appealing to Africans in the diaspora. Lastly, there is equally the need for West Africa economies to rely more on domestic investment rather than on foreign capital inflows for their economic growth.