Remittances and Economic Growth Nexus: The Moderating Role of Economic Uncertainty and Complexity in Emerging Markets

Abstract

The relationship between remittances and economic growth has produced mixed empirical evidence, yet few studies have explored how macroeconomic conditions shape this relationship. This paper fills this gap by investigating the moderating effects of economic uncertainty and complexity on the remittance-growth nexus across 26 emerging economies during 1996-2023. Applying the CS-ARDL methodology to control for cross-sectional dependence, the study finds that the direct effect of remittances on growth is negative. Nevertheless, the interaction terms reveal that remittances positively contribute to growth under conditions of heightened uncertainty and in economies characterized by greater productive sophistication. These novel findings reconcile conflicting evidence in the literature by demonstrating that remittance effects are context-dependent. The results underscore the need for policies that strengthen economic complexity and leverage remittances as a stabilization tool during uncertain times.