Effect of transaction costs on international remittance flows from developed countries: A Sub-Saharan context

 

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dc.contributor.advisor Charteris, Ailie en_ZA
dc.contributor.author Wahito, Isaac en_ZA
dc.date.accessioned 2018-11-23T06:58:41Z
dc.date.available 2018-11-23T06:58:41Z
dc.date.issued 2018 en_ZA
dc.identifier.citation Wahito, I. 2018. Effect of transaction costs on international remittance flows from developed countries: A Sub-Saharan context. University of Cape Town. en_ZA
dc.identifier.uri http://hdl.handle.net/11427/29081
dc.description.abstract Remittances play a major role both at a household and a macro-level especially in developing countries. They are associated with benefits such as of economic growth and employment opportunities for a country, while at the household level, remittances are a stable source of income in provision of basic needs such as of food, clothing, shelter and education. Remittance costs have been viewed as a major deterrent to higher volumes of remittance inflows to a country and tend to encourage the use of the cheaper informal channels, which have adverse consequences. This study investigates the drivers of remittance transaction costs and the subsequent effect of transaction costs on remittance flows using bilateral data between several countries in Sub-Saharan Africa and the United Kingdom over the period 2011 to 2014. Remittance costs are measured as a percentage of the amount remitted. Using multivariate generalised least squares analysis of panel data, this study tested the first hypothesis that financial development, banking concentration and financial risk of a migrant's home country influence transaction costs. Secondly, the study tested the hypothesis that transaction costs have a negative relationship with remittance inflows into the countries. The specific effect of transaction costs on remittance flows is investigated alongside other variables which have been identified to influence remittance flows. These include; the stock of migrants in the host country and host and home country income levels proxied by gross domestic product per capita. The results of random effects estimations show that financial development and bank concentration have a positive and statistically significant relationship with transaction costs. That is, a higher level of financial development does not necessarily lower transaction costs but a high banking concentration, which infers lower competition in the banking sector, drives remittance costs up. On the effect of transaction costs on remittance flows into the countries in sub-Saharan Africa, the study found a negative and significant relationship. That is, a higher cost in remitting funds via formal channels reduces the remittance flows and as such, it thus increases the probability of the use of informal channels. The stock of migrants is also found to have a positive and statistically significant effect on remittances, meaning that a higher number of migrants in a developed country leads to higher volumes of remittances to the migrants' home countries. The proxies for incomes were found to be insignificant. The implications of the significance of remittance costs are noteworthy as they add evidence on the need to cut remittance costs by formal channels significantly to three percent of the total amount remitted by global development institutions. en_ZA
dc.language.iso eng en_ZA
dc.subject.other Development Finance en_ZA
dc.title Effect of transaction costs on international remittance flows from developed countries: A Sub-Saharan context en_ZA
dc.type Master Thesis
uct.type.publication Research en_ZA
uct.type.resource Thesis en_ZA
dc.publisher.institution University of Cape Town
dc.publisher.faculty Faculty of Commerce en_ZA
dc.publisher.department Research of GSB en_ZA
dc.type.qualificationlevel Masters
dc.type.qualificationname MCom en_ZA
uct.type.filetype Text
uct.type.filetype Image
dc.identifier.apacitation Wahito, I. (2018). <i>Effect of transaction costs on international remittance flows from developed countries: A Sub-Saharan context</i>. (Thesis). University of Cape Town ,Faculty of Commerce ,Research of GSB. Retrieved from http://hdl.handle.net/11427/29081 en_ZA
dc.identifier.chicagocitation Wahito, Isaac. <i>"Effect of transaction costs on international remittance flows from developed countries: A Sub-Saharan context."</i> Thesis., University of Cape Town ,Faculty of Commerce ,Research of GSB, 2018. http://hdl.handle.net/11427/29081 en_ZA
dc.identifier.vancouvercitation Wahito I. Effect of transaction costs on international remittance flows from developed countries: A Sub-Saharan context. [Thesis]. University of Cape Town ,Faculty of Commerce ,Research of GSB, 2018 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/29081 en_ZA
dc.identifier.ris TY - Thesis / Dissertation AU - Wahito, Isaac AB - Remittances play a major role both at a household and a macro-level especially in developing countries. They are associated with benefits such as of economic growth and employment opportunities for a country, while at the household level, remittances are a stable source of income in provision of basic needs such as of food, clothing, shelter and education. Remittance costs have been viewed as a major deterrent to higher volumes of remittance inflows to a country and tend to encourage the use of the cheaper informal channels, which have adverse consequences. This study investigates the drivers of remittance transaction costs and the subsequent effect of transaction costs on remittance flows using bilateral data between several countries in Sub-Saharan Africa and the United Kingdom over the period 2011 to 2014. Remittance costs are measured as a percentage of the amount remitted. Using multivariate generalised least squares analysis of panel data, this study tested the first hypothesis that financial development, banking concentration and financial risk of a migrant's home country influence transaction costs. Secondly, the study tested the hypothesis that transaction costs have a negative relationship with remittance inflows into the countries. The specific effect of transaction costs on remittance flows is investigated alongside other variables which have been identified to influence remittance flows. These include; the stock of migrants in the host country and host and home country income levels proxied by gross domestic product per capita. The results of random effects estimations show that financial development and bank concentration have a positive and statistically significant relationship with transaction costs. That is, a higher level of financial development does not necessarily lower transaction costs but a high banking concentration, which infers lower competition in the banking sector, drives remittance costs up. On the effect of transaction costs on remittance flows into the countries in sub-Saharan Africa, the study found a negative and significant relationship. That is, a higher cost in remitting funds via formal channels reduces the remittance flows and as such, it thus increases the probability of the use of informal channels. The stock of migrants is also found to have a positive and statistically significant effect on remittances, meaning that a higher number of migrants in a developed country leads to higher volumes of remittances to the migrants' home countries. The proxies for incomes were found to be insignificant. The implications of the significance of remittance costs are noteworthy as they add evidence on the need to cut remittance costs by formal channels significantly to three percent of the total amount remitted by global development institutions. DA - 2018 DB - OpenUCT DP - University of Cape Town LK - https://open.uct.ac.za PB - University of Cape Town PY - 2018 T1 - Effect of transaction costs on international remittance flows from developed countries: A Sub-Saharan context TI - Effect of transaction costs on international remittance flows from developed countries: A Sub-Saharan context UR - http://hdl.handle.net/11427/29081 ER - en_ZA


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