Remittances Growth Nexus: What Does the Evidence in the Common Market for Eastern and Southern Africa (COMESA) Show?

Kenya - 12 February 2018

The study uses country level panel data covering the period 2000 to 2014 to investigate the impact of remittances on the GDP per capita in 19 member countries of the Common Market for Eastern and Southern African (COMESA) region. The one-step Generalized Method of Moments (GMM) difference estimator is used to estimate a dynamic model of GDP per capita model. The results show that remittances exert a positive and statistically significant impact on the GDP per capita in the COMESA region. Additionally, the absorptive capacity has a positive impact on growth and a positive effect on the ability of the COMESA region to absorption and benefit from the spillovers of remittances. The findings suggest that the region should strive to lower costs of sending remittances, remove barriers to entry of the remittances market, introduce efficient technology systems and install tax or exemption schemes so as to redirect the uses of remittances to more productive sectors of the economy. The absorptive capacity of the region should also be improved so as to raise GDP per capita levels.

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