Remittances and Banking Services: Evidence from Mexico

Ernesto Córdova
Asli Demirgüç-Kunt
María Pería
Christopher Woodruff
Publication Type: 
Papers
Journal Name: 
Journal of Development Economics
Journal Volume: 
Forthcoming
Publication Year: 
2010

Despite the importance of remittances to developing countries, their impact on banking sector breadth and depth in recipient countries has been largely unexplored. We examine this topic using municipality-level data on the fraction of households receiving remittances and on measures of banking breadth and depth for Mexico. We find that remittances are strongly associated with greater banking breadth and depth, increasing the number of branches and accounts per capita and the amount of deposits to GDP. These effects are significant both statistically and economically, and are robust to the potential endogeneity of remittances, inclusion of a wide range of controls and even municipal fixed effects specifications using an alternative panel data set from a sample of municipalities.

JEL Codes: 
F37, G21, O16
Region: 
Latin America/Caribbean
Country: 
Mexico
Topic: 
International Finance
Topic: 
Financial Institutions
Topic: 
Savings
Topic: 
Growth