The Impact of Workers’ Remittances on the Economic Growth in Egypt: A Financial Inclusion Perspective

Abstract

This study aims to evaluate the impact of remittances from overseas workers on Egyptian economic growth within the financial inclusion framework as a moderating factor. Utilizing annual time-series data from 2004 to 2020 and the boundaries test approach, which relies on the ARDL model, the study found a non-linear relationship between remittances from overseas workers and economic growth in both the short and long-run. This nonlinear relationship is represented as a U-shaped curve, suggesting that the beneficial impact of remittances on economic growth is only apparent when their growth rate exceeds 41.37 percent. This threshold was met in only three years: 2005, when remittances increased by 50.2%; 2007, with a growth rate of 43.6%; and 2010, with a growth rate of 74.2%. Furthermore, the study found that financial inclusion has an insignificant positive impact on economic growth in both the short and long runs. Furthermore, the degree of financial inclusion did not strengthen the relationship between remittances and economic growth. Based on the results of both Cohen's d effect size and the correlation indexes, the relationship between remittances and economic growth has significant practical importance, regardless of whether the growth rate of remittances exceeds or falls below the 41 percent threshold each year.