Do remittance inflows reduce growth instability in Sub-Saharan Africa?

Abstract

<title>Abstract</title> Remittances have become one of the most important sources of development finance in developing countries, particularly in sub-Saharan Africa. They provide a stable source of household income for consumption and can therefore play a role in stabilizing economic cycles. Indeed, migrant remittance flows can alleviate economic growth instability by easing constraints on domestic resources and indirectly increase growth instability through real exchange rate appreciation. In this context, this paper investigates the impact of remittance inflows on economic growth in a sample of 45 Sub-Saharan African countries from 1980–2019. We use system-GMM to control the presence of endogeneity from the dynamic effects of remittances. The empirical results show that remittance inflows negatively and significantly affect economic growth instability. The results are robust to several robustness checks. The results confirm the hypothesis that migrant remittances are a stabilising source of macroeconomic shocks. Sub-Saharan African countries should strengthen policies to attract remittances to finance their development strategy. <bold>JEL classification : C23</bold> <bold>E32, F24, O55</bold>