Financial development, remittances and economic growth: A threshold analysis

Figures & data

Figure 1. Trend of real GDP growth and financial development in Ghana.

Source: Authors' Construct, 2019

Figure 2. Trend of real GDP growth and remittance inflow (%GDP) in Ghana.

Source: Authors' Construct, 2019

Table 1. Summary statistics

	GDPG	L	K	FD	RI	GR	DEBT	REER
Mean	5.54	2.62	20.26	0.14	1.35	5.91	64.77	144.54
Median	4.85	2.58	21.54	0.13	0.41	5.15	64.41	107.37
Maximum	14.05	3.44	30.93	0.21	13.27	14.05	129.32	559.52
Minimum	3.30	2.25	6.85	0.09	0.01	3.30	18.11	69.46
Std. Dev.	2.22	0.25	6.37	0.04	2.67	2.41	31.01	99.03
Skewness	2.11	1.37	−0.51	0.22	3.18	1.52	0.33	2.99
Kurtosis	7.94	5.22	2.31	1.37	13.65	5.26	2.34	12.01
J-Bera	56.25	16.58	2.03	3.78	205.27	19.07	1.17	155.86
Probability	0.00	0.00	0.36	0.36	0.00	0.00	0.56	0.00
Sum	177.26	83.73	648.20	4.59	43.17	189.02	2072.55	4625.43
S.S. Dev	153.41	2.04	1257.47	0.06	221.71	180.39	29,816.6	304,003.4
Obs.	32	32	32	32	32	32	32	32

Note: S.S. Dev represents Sum of Square Deviation, Obs. denotes Observation, J-Bera also denotes Jarque Bera and Std. Dev. represents Standard Deviation

Table 2. ADF stationarity test

Variables	Levels		First Difference
	Intercept	Intercept+Trend	Intercept	Intercept+Trend
GDPG	−3.47**	−3.94**	−8.04***	−7.87***
K	−2.41	−3.04	−9.83***	−17.83***
L	−3.75**	−3.09	−5.33**	−7.99***
FD	−1.09	−2.09	−5.98***	−6.11***
RI	7.25	9.62	−4.36**	−5.31**
GR	−2.64*	−4.19*	−12.04***	−18.38***
DEBT	−1.59	−1.84	−4.31**	−4.29**
REER	−12.88***	−25.64***	−11.31***	−8.12***

Note ***, ** and * denotes the rejection of the null hypothesis at 10%, 5% and 1% significance level

Table 3. Phillip perron stationarity test

	Levels		First Difference
	Intercept	Intercept+Trend	Intercept	Intercept+Trend
GDPG	−3.43**	−3.94**	−8.43***	−4.35**
K	−2.45	−3.15	−6.75***	−6.78***
L	−2.90*	−1.87	−5.23***	−5.56***
FD	−1.12	−2.09	−5.90***	−5.93***
RI	1.42	3.33*	−4.22***	−4.69**
GR	−0.52	−4.22**	−7.74***	−4.25**
DEBT	−1.32	−1.64	−4.33**	−4.31**
REER	−12.83***	−7.01***	−4.38***	−3.80**

Note ***, ** and * denotes the rejection of the null hypothesis at 10%, 5% and 1% significance level

Table 4. Bounds test result for co-integration (Model 1)

Critical Value	10% Level		5% Level		2.5% Level		1% Level
	I (0)	I (1)	I(0)	I(1)	I(0)	I(1)	I(0)	I(1)
K = 7	1.92	2.89	2.17	3.21	2.43	3.51	2.73	3.9
F(DLGDPG) = F (DLRGD/Ln(K),Ln(L),							F-Statistics
Ln(FDRI),Ln (FD),RI,GR,Ln(DEBT),)							50.65***

Source: Authors' Construct, 2019.

Table 5. ARDL results (Dependent variable is the log of real GDP growth)

	ARDL
VARIABLE	SHORT-RUN	LONG-RUN
Capital	0.11**	0.39
	(0.05)	(0.30)
Labour	0.46***	2.17
	(0.05)	(1.43)
Labour(−1)	0.50***	–
	(0.05)	–
Government Revenue	0.12***	0.44*
	(0.01)	(0.23)
Government Revenue (−1)	0.55***	–
	(0.05)	–
Financial Development*Remittances	0.84***	0.31**
	(0.13)	(0.12)
Financial Development*Remittances(−1)	0.45***	–
	(0.10)	–
Remittances	0.41***	0.26*
	(0.06)	(0.13)
Financial Development	0.10**	0.17
	(0.05)	(0.17)
Debt	−0.16	−0.31**
	(0.28)	(0.13)
CONS	–	9.14***
	–	(1.48)
ECT(−1)	−0.61***	–
	(0.02)

Note ***, ** and * denotes 1%, 5% and 10% level of significance, respectively.

Table 6. Model diagnostics and stability tests (ARDL model 1)

Test Statistics	F-statistics/Chi^2		P-Value
Serial Correlation	$X_{auto}^2$	$F\left(2,66\right)0.19$	0.83
Functional form	$X_{Reset}^2$	$F\left(1,67\right)0.68$	0.43
Normality Test	$X_{Norm}^2$	Not Applicable	0.62
Heteroscedasticity	$X_{BP}^2$	$F\left(18,11\right)1.04$	0.49

Table 7. Long-run result for Financial Development Threshold

Variable	Coefficient	Std. Error	T-Statistic
Capital	0.11**	0.03	4.25
Labour	1.35**	0.24	5.67
Financial Development	1.34*	0.36	3.72
Remittances	0.04*	0.05	0.02
Financial Development^2	−0.96*	0.40	−2.41
Debt	0.01**	0.00	3.89
Government Revenue	0.11	0.06	1.75
Real Effective Exchange Rate	0.01**	0.00	4.02
CONS	2.01	1.08	1.85

Note: *, ** and *** denotes the rejection of the null hypothesis at 10%, 5% and 1% significance level

Source: Authors' Construct, 2019

Figure A1. Plots of CUSUM and CUSUMSQ for model 2.

Table A1. Bounds test result for co-integration (ARDL MODEL 2)

Critical Value	10% Level		5% Level		2.5% Level		1% Level
	I (0)	I (1)	I(0)	I(1)	I(0)	I(1)	I(0)	I(1)
K = 8	1.92	2.89	2.17	3.21	2.43	3.51	2.73	3.9
Dependent Variable							F-Statistics
F(DLGDPG) = F (LN(K), LN(PG),LN(FD),LN($F{D}^2$),
LN(RI), LN(DEBT)),LN(GR),LN(REER))							5.8960***

Source: Authors' Construct, 2019.

Table A2. Model diagnostics (ARDL MODEL 2)

Test Statistics		F-statistics	Probability Value
Serial Correlation	$X_{auto}^2$	F (1.3)3.81,361	0.1459
Functional form	$X_{Reset}^2$	F (1,3)2.085455	0.2444
Normality Test	$X_{Norm}^2$	Not Applicable	0.6945
Heteroskedasticity	$X_{BP}^2$	F (25,4)1.5190	0.3734

Source: Authors' Construct, 2019.

Table B1. Short-run result for the threshold (Model 2)

Variable	Coefficient	Std. Error	T-Statistic	Prob.
DLN(GDP(−1))	0.7517***	0.0354	21.2136	0.0000
DLN(K)	0.0839***	0.0063	13.3213	0.0002
DLN(K(−1))	0.1885***	0.0137	13.7622	0.0002
DLN(PG)	−0.9759***	0.0785	−12.4403	0.0002
DLN(PG(−1))	1.6169***	0.1236	13.0858	0.0002
DLN(RI)	−0.0001	0.0013	−0.0673	0.9496
DLN(RI(−1))	0.0056*	0.0012	4.4039	0.0117
DLN(FD)	−0.4750***	0.0346	−13.7298	0.0002
DLN(FD(−1))	0.1253***	0.0138	9.0503	0.0008
DLN($F{D}^2$)	0.4149***	0.0329	12.6184	0.0002
DLN($FD\left(-1\right){)}^2$)	0.3346***	0.0262	12.7814	0.0002
DLN(DEBT)	−0.0072***	0.0005	−14.3386	0.0001
DLN(DEBT(−1))	−0.0003*	0.0005	−4.2606	0.0130
DLN(GR)	0.0529***	0.0029	17.9727	0.0001
DLN(REER)	−0.0061***	0.0004	−14.3357	0.0001
DLN(REER(−1))	−0.0005**	0.0001	−7.2031	0.0020
ECM	0.6781***	0.0489	13.8427	0.0002

Note *, ** and *** denotes the rejection of the null hypothesis at 10%, 5% and 1% significance level

Figure B1. Plot of CUSUM and CUSUMSQ (Stability test for model 1).