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, Türkiye, and South Africa, over the period 2000-2022. Based on the relevant literature, two different models were estimated using broad money supply and domestic credit to the private sector as financial development indicators. The generalized panel quantile regression results show that remittances positively affect broad money supply in all quantiles except Q06, have a positive effect on domestic credit to the private sector in quantiles Q01-Q04, and have a negative effect on Q07-Q08. In this context, the findings reveal that remittances are effective for financial development in CIVETS countries. They especially have a more positive effect on monetary policy, and their effect on domestic credit to the private sector is changeable.