Remittances, Economic Freedom, and Economic Growth in North African Countries

Nahed Zghidi
Zouheir Abid
JEL codes: 
C23 - Models with Panel Data; Longitudinal Data; Spatial Time Series, F24 - Remittances, O10 - General, O43 - Institutions and Growth.
This contribution investigates the causal interactions between foreign direct investment (FDI), economic freedom and economic growth in a panel of 4 countries of North Africa (Tunisia, Morocco, Algeria and Egypt) from 1980 to 2012. Using System Generalized Method of Moment (GMM) panel data analysis, we find strong evidence of a positive link between remittances and economic growth. We also find evidence that economic freedom appear to be working as a complement to remittances and, moreover, that the effect of remittances is more pronounced in the presence of the economic freedom variable. Thus, to the extent that remittances have become a major source of external development finance, policies promoting greater freedom of economic activities gain significantly from the presence of remittances.
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