Migrant Workers' Remittances and External Trade Balance in Sub-Sahara African Countries
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Canadian Center of Science and Education
Abstract
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Workers’ remittances represent a major source of private external finance for many developing countries.
Moreover, these flows which have been on the upward trend in recent times are now widely regarded as
important financial flows to many developing countries that receive them in large quantity. One major concern
about remittances is that in countries receiving significant flows, the local currencies could appreciate artificially
due to over-valuation; this might in turn be harmful to the overall trade balance and long-run economic growth
of the receiving economies.This study investigates the possibility of this phenomenon in some selected
Sub-Saharan African countries. The hypothesized link between workers’ remittances and external trade balance
was specified in a linear dynamic panel data model and estimated using the system Generalized Method of
Moments.A major finding shows that remittance inflows have a contemporaneous negative but statistically
insignificant impact on external trade balance across the sampled countries. This result suggests that remittance
flows may not be helpful in promoting the goal of maintaining a sustainable external trade balance in the
selected SSA economies.
Keywords
H Social Sciences (General), HB Economic Theory