Analyzing Economic Development : What Can We Learn from Remittances Recipient Countries?

Abstract: This paper investigates the relationship between economic growth, and remittances, financial development, and globalization after controlling for different levels of international financial distress. We study four of the major remittances recipient countries individually over the period of 1976 to 2012 using an autoregressive distributed lag method (ARDL). The results show that in Mexico, Bangladesh, and India remittances work as a stabilizing factor on their economies. Significant results of a positive long run correlation between remittances and GDP levels are also found in the results of Bangladesh and Mexico. High levels of financial distress have a negative impact on GDP in Mexico. We conclude that the level of financial integration between economies affect how financial distress in one economy spills over to another. This paper also finds that in the short run when globalization increases, uncompetitive businesses are outrivaled in Mexico and in Bangladesh, due to big neighbors like the United States or China and India. For Bangladesh, the financial development is destabilizing in the short run, and in the long run it correlates negatively with GDP. For India, this study finds that higher levels of both financial development and globalization promote long term economic growth. For China, few conclusions are drawn.