REVISITING REMITTANCE-LED DEVELOPMENT NEXUS IN DEVELOPING COUNTRIES THROUGH THE ROLE OF DIGITALIZATION

Abstract

Although remittance inflow is personal income for recipient households, its aggregate determines national reserves, foreign exchange stability, capital formation, investment, employment, and income. We argue that digitalization plays a crucial role in promoting the remittance-led development nexus in developing countries via digital platforms that enable faster, cheaper, safer, and instant transfer of remittance. This study examines the moderating role of digitalization on the remittance-development nexus in the top ten developing countries with the highest remittances from 1999 to 2022. We apply the panel ARDL methods, which include mean group (MG), common correlate effects (CCE), and augmented mean group (AMG) estimators. The main findings of this study establish that digitalization has minimal influence on the remittancedevelopment nexus in developing countries due to the insignificant coefficients in all the models estimated. The direct estimation indicates that remittance and digitalization promote economic development, but with weak coefficients in almost all the models. Policymakers in developing countries should come up with an effective policy framework that will focus on increasing digitalization, while at the same time reducing the cost of sending remittances to promote remittance inflowvia official channels for higher economic development.