Program and Development Research

Program and Development Research

The Impact of Remittances on Economic Growth in the Middle East and North Africa: A Dynamic Panel Data Approach"

Document Type : Original Article

Authors
1 General Affairs Economics Department, Kharazmi University, Tehran, Iran
2 Master of industrial engineering, Kharazmi University, Tehran, Iran
Abstract
Remittance inflows represent one of the most significant sources of foreign exchange for developing countries and can potentially contribute to macroeconomic stability and economic growth. However, the effectiveness of these flows largely depends on contextual and institutional factors. This study investigates the impact of remittances on economic growth in Middle East and North Africa (MENA) countries over the period 2010–2022, incorporating institutional quality, financial development, and foreign direct investment (FDI) as auxiliary explanatory variables.
To analyze the dynamic relationships among the variables, the study employs a panel data approach using the Generalized Method of Moments (GMM), which effectively addresses potential endogeneity and unobserved heterogeneity in panel models.
The empirical findings reveal that remittances exert a negative and statistically significant effect on economic growth. Conversely, institutional quality has a positive and significant impact, while both financial development ,FDI and cross effect of FD and remittance are also found to positively and significantly influence on growth.
The results suggest that, in the absence of sound institutional frameworks and targeted policy interventions, remittance inflows may fail to promote economic growth and could instead encourage unproductive consumption and speculative behavior. Therefore, channeling remittance resources toward productive investment is essential to harness their potential for sustainable economic development.
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