Do remittances improve financial inclusion in recipient countries?

This paper analyzes the impact of remittances on financial inclusion. We use different financial inclusion variables and the study covers a large sample of 111 countries over the period 2004-2017. Using fixed effects and dynamic panel models, we find that remittances improve financial inclusion in recipient countries. Moreover, our results reveal evidence of significant non linear effects. Specifically, remittances will be more likely to contribute to financial inclusion in countries with less developed financial system. This threshold effect is confirmed when the endogeneity of remittances is taken into account using the GMM system estimator and the non-linear relationship is estimated with PTR (Panel Threshold Regression) method.