Abstract : Purpose – The purpose of this paper is to study the effect of remittances on economic growth in
MENA region. More precisely this study tries first to explore the short-run and the long-run
relationship between remittances and economic growth. Second, the authors address how the local
financial development and institutional environment influence a country’s capacity to take advantage
Design/methodology/approach – The panel data unit-root test as well as the panel data
co-integration is used for the purpose of the long-run remittances growth relationship and the IV
technique with GMM option is adopted to study the short-run link.
Findings – This paper provides empirical evidence that remittances have a positive effect on
economic growth in the long run and a negative effect in short run. The short-run effect of remittances
on economic growth is conditional. In fact, it depends in the levels of financial development and
institutional quality, respectively.
Practical implications – As practical implications, policy interventions, to improve the functioning
of governance institutions, enforcing regulation and political stability, enhancing financial system and
socio-economic environment are also crucial for increasing the benefit effects of remittances.
Originality/value – The research is an extension of previous evidence in two ways; the authors have
examined the long-run and short-run remittances-growth relationship in the first time. In the second
time, the authors have explored the conditional remittances-growth relationship in MENA countries.
Specifically, the authors have examined whether the remittances-growth nexus is affected by financial
development and institutional quality levels in MENA countries.