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Do remittances moderate financial development–informality nexus in North Africa?
Author(s) -
Akçay Selçuk,
Karabulutoğlu Emre
Publication year - 2021
Publication title -
african development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.654
H-Index - 32
eISSN - 1467-8268
pISSN - 1017-6772
DOI - 10.1111/1467-8268.12502
Subject(s) - nexus (standard) , panel data , economics , psychological intervention , development economics , embedded system , psychology , psychiatry , computer science , econometrics
The prevalent informality and sheer size of international remittances characterize the North African countries. This study primarily aims at investigating how remittances moderate the effects of financial development on the informal economy in North African countries. Employing pool mean group (PMG)/panel ARDL approach and a balanced panel data set over the period 1980–2015, we find that remittances moderate the negative relationship between financial development and informal economy. This finding suggests that remittances bolster financial development, which, in turn, decreases the informal economy. Based on this result, we recommend that tailored policies and interventions are needed to promote financial development and international remittances in the North African region.