Original Research

A nonlinear autoregressive distributed lag approach to remittances and access to financial inclusion in Jordan

Bashier A. Alabdulrazag, Mofleh A. Alshogeathri
South African Journal of Economic and Management Sciences | Vol 27, No 1 | a5133 | DOI: https://doi.org/10.4102/sajems.v27i1.5133 | © 2024 Bashier A. Alabdulrazag, Mofleh A. Alshogeathri | This work is licensed under CC Attribution 4.0
Submitted: 29 April 2023 | Published: 31 January 2024

About the author(s)

Bashier A. Alabdulrazag, Department of Economics, College of Business Administration, King Saud University, Riyadh, Saudi Arabia; and Department of Economics, Mu’tah University, Karak, Jordan
Mofleh A. Alshogeathri, Department of Economics, College of Business Administration, King Saud University, Riyadh, Saudi Arabia

Abstract

Background: Financial inclusion and its relationship with remittances has been widely an area of investigation among researchers.

Aim: The study investigates the asymmetric effects of remittance inflows on financial inclusion (FI) in Jordan.

Setting: Annual time series data (1990–2022) constitute 33 observations.

Method: This study uses the nonlinear autoregressive distributed lag (NARDL) model.

Results: The empirical evidence showed a long-run equilibrium relationship among the model’s variables. Furthermore, the standard Wald test provides evidence of the asymmetric long-run and short-run effects of remittance inflows on FI and, hence, the nonlinear relationship.

Conclusion: The Jordanian government should promote efforts to simulate the inflow of remittances to the country. This study uncovered the vital relationship between FI and remittance inflows and its important role in enhancing financial sector development.

Contirbution: This study contributes to the existing literature on the remittances-FI nexus. First, it uncovered the vital and important relationship between FI and remittance inflows, and its crucial role in enhancing financial sector development. Second, unlike previous studies that used linear ARDL or traditional estimation methods, it applied the NARDL approach to test for the existence of a nonlinear relationship between the model’s variables. Third, it suggests that policymakers in Jordan government should put effort into stimulating the inflow of remittances to promote FI and, hence, economic growth and development.


Keywords

remittances; financial Inclusion; Jordan; cointegration; NARDL; normality; stationary; linearity.

JEL Codes

C23: Panel Data Models • Spatio-temporal Models; G15: International Financial Markets; G53: Financial Literacy

Sustainable Development Goal

Goal 1: No poverty

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