Assessing the Role of Remittances and Financial Deepening in Growth

Abstract

We investigate the relationship between remittances, financial deepening and the growth of the Lebanese economy using quarterly data from 1993 to 2011. Our results provide strong support for the theoretical contention that remittances and financial development share a robust long-run relationship with growth in Lebanon. However, the results indicate that short-run effects on growth volatility are statistically insignificant from financial development but strongly significant from remittances. These results extend recent findings on the financial development, remittances and growth nexus and imply that benefits expected from remittances for addressing growth volatility in Lebanon materialize more than those associated with financial development.