Remittances and emerging African economies' growth nexus in a post COVID‐19 era

Abstract

AbstractThis article aims to study the relationship between remittances and economic growth in African emerging economies from 1990 to 2021. The study centers on the optimistic, pessimistic, and the dual‐gap theories. The autoregressive distributed lag and cointegration techniques are applied. The findings indicate that remittances have a nonsignificantly negative effect on the gross domestic product growth rate. Domestic credit to the private sector and the inflation rate negatively influence economic growth. Policymakers should prioritize targeted response to the COVID‐19 crisis by reducing the costs of access to vaccines and healthcare for the populace so that the received remittances should significantly improve the population's welfare positively. Governments should recognize remittance services and reduce remittance costs by reducing taxes on remittances. Governments should increase the formalization of remittance transfers to improve accessibility to financial services to decrease the unbanked population. The monetary authorities should establish remittance‐based policies that promote the use of formal channels, ease the pressure on emerging countries' credit services, and improve foreign exchange rates. Banks should create financial products and services that attract investments and growth for the remittances of diasporas in developing economies.