The Role of Remittances in Financial Development: Evidence from the Philippines

A significant number of Filipino migrant workers abroad contributes notably to the Philippine economy through international remittances. The Philippines ranks ninth globally among the top 20 countries with the largest diaspora population. These remittances play a pivotal role in the nation’s economic framework, accounting for 9.5% of its GDP. While they foster various economic effects, including promoting economic development, the precise impact of these remittances on financial development in the Philippines remains insufficiently explored. This study seeks to probe the relationship between remittances and financial development, utilizing a time-series data model that covers 1981 to 2021. Empirical results derived from the autoregressive distributed lag (ARDL) model indicate a long-term positive impact of remittances on financial development, with a short-term negative influence. The Toda-Yamamoto Granger causality analysis further corroborates this conclusion.