Abstract:
This study analyzes the impact of migrant remittances on financial development in Turkey using annual data from 1974 to 2019. Linear and nonlinear Autoregressive Distributed Lag (ARDL) bound testing approaches are employed to check the symmetric and asymmetric effects of remittances. According to ARDL bounds test results, there is no cointegration among the variables. ARDL short-run results show that all variables, except remittances, are found to be statistically significant. NARDL bounds test revealed that the variables of interest are cointegrated. Moreover, migrant remittances exhibit an asymmetric behavior on financial development in the long and short-run. A decrease in remittances affect financial development in the same period whereas the effect of an increase in remittances arises in the next period. Further, this relationship is confirmed by employing a Wald test. In addition to that, out of control variables, inflation and real GDP have statistically significant influence on financial development. Increase in inflation leads to a decreasing pattern in financial development while increase in real GDP has a positive influence on financial development. In conclusion, migrant remittances are found to be one the important factors that affect the financial development of Turkey. As a way of contributing to financial development performance, governments may attract remittances to the country by implementing fiscal policies such as reducing taxes or economic policies that stimulate investments based on savings. Implementing inflation decreasing policies seem to be another effective way of increasing financial development .