Remittances and Financial Development: Is there a Direct Link? Evidence from Turkish Data

Abstract
This study investigates whether there is a direct link between remittances and financial development with time series data on Turkish workers’ remittances from Germany over the five decades. Studies on the direct or indirect link of the remittances-financial development-growth have given mixed results depending on the sample of the countries and regions chosen. In this study rather than analysing groups of developing countries or groups of regions we concentrate on only one developing country – Turkey - where financial markets rather well developed. The Toda and Yamamoto (1995) procedure is adopted for testing the direct link or for the Granger non-causality, as variables are integrated in an arbitrary order and may not be contegrated. We find no evidence of causality from remittances to financial development or financial development to remittances. Possible reasons are explored for this result.