The international remittances and financial development nexus in CIVETS countries: Evidence from a panel quantile regression approach

Abstract

International remittances are crucial financial sources for developing countries. Thanks to globalization, international remittances flows have increased worldwide and become the driving force of financial development. This paper investigates the role of international remittances on financial development for CIVETS countries, including Colombia, Indonesia, Vietnam, Egypt, Turkiye, and South Africa, over the period 2000-2022. The generalized panel quantile regression results indicate that international remittances positively affect financial development (FD) in all quantiles except the Q06 quantile. Trade openness (TO) has a positive effect on FD in all quantiles. Furthermore, economic growth contributes to FD in the Q01-Q05 quantiles and negatively affects in the Q09 quantile. However, foreign direct investment (FDI) has no statistically significant effect on financial development. In addition, the Dumitrescu-Hurlin panel causality results show a one-way causality relationship running from FD to TO and a two-way causality between FD and economic growth. Empirical findings demonstrate that international remittances promote FD in CIVETS countries. Therefore, attracting remittances into the financial sector is crucial for CIVETS countries.