(A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS, VIETNAM – THE NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS)
By Huynh Thi My Chi (VNP 20)
Academic Supervisor: Dr. Nguyen Van Ngai
ABSTRACT: Although the impact of remittances on economic growth and poverty has always been a controversial problem for researchers and policy makers as remittance inflow have been becoming one of the largest external capital sources for many countries, its direct effect on financial development merely attract more attention after the financial crisis of 2007-2008. In an effort to contribute to empirical studies on this issue, this study utilizes fixed effect, random effect and system Generalized Method of Moments (GMM) to investigate the direct impact of remittances on two dimensions of financial development comprising the percentage of domestic credit to private sector by banks and broad money to GDP in thirty-seven Asian countries during the period 1990-2014. Furthermore, this study also examines whether there are different effects of remittance inflows in high, middle and low-income countries in this area. The results show that an increase in remittances seems to have no impact on financial development in general while there are mix results regarding the different income groups of countries in Asia.
Keywords: Remittances, Financial development, Asia, Income Group.
Abbreviations: FDI – Foreign Direct Investment; FEM – Fixed Effect Model; GDP – Gross Domestic Product; GDPPC – Gross Domestic Product Per Capita; GMM – Generalized Method of Moments; ODA – Official Development Assistant; REM – Random Effect Model
Full version is available at Library of Vietnam-Netherland Progamme: 1A Hoang Dieu, Phu Nhuan Dist, Ho Chi Minh city, Vietnam.