The Role of Remittances in the Sustainable Development of Developing Economies: A Panel Data Analysis of 43 African Countries

Abstract

This study investigates the economic determinants of remittances in developing African nations, employing a panel analysis of 43 countries to discern the macroeconomic factors that significantly impact remittance inflows. As remittances play a pivotal role in the finan-cial stability of many African economies, understanding these determinants is essential for informed policy-making and strategic economic planning. Utilizing data from 1980 to 2022, we applied the Feasible Generalized Least Squares methodology to assess the influ-ence of various economic indicators. Our findings indicate a positive correlation between remittance inflows and key variables such as GDP per capita growth, money supply, imports, and exchange rates. Conversely, higher levels of government spending, inflation, and exports are associated with lower remittance inflows. The role of unemployment in influencing remittances is complex and warrants further investigation. Additionally, gov-ernance quality significantly affects remittance flows; stronger anti-corruption measures are linked to higher remittances, whereas more effective government and stronger rule of law are associated with lower remittances, likely due to a diminished dependency on exter-nal financial aid. These insights highlight the intricate relationship between economic per-formance, institutional quality, and remittance inflows, offering valuable guidance for poli-cymakers in developing and emerging economies who seek to enhance remittance inflows as a crucial source of financial support.