Remittances and Financial Development in Kenya: An Autoregressive Distributed Lag Approach

This study estimates an Autoregressive Distributed Lag (ARDL) econometric model between 1970 to 2018 test the long-run effect of remittances on financial development in Kenya. It also interacts with monetary policy and human capital their complementarity facilitating development. The finds that hurt contradicting theoretical view. A possible explanation is substitutability hypothesis which states replace demand for products. model’s results find complements while harms role remittances. More studies are required isolate cause negative externality boost Surprisingly, openness economic growth used as control variables have effects development, need further study. equilibrium adjusts at a speed 51.8 percent correct short-term disequilibrium after every two years. recommends policymakers Kenya should be cautious about side identify prudent monetary, exchange rate, trade, fiscal policies curb economy broader planning.