The Role of Liquidity in the Remittances-Human Capital Development Nexus in Emerging Economies
The Role of Liquidity in the Remittances-Human Capital Development Nexus in Emerging Economies

Summary/Abstract: The objectives of this paper are threefold: Firstly, to investigate the impact of remittances on human capital development. Secondly, to explore the influence of stock market liquidity on human capital development. Thirdly, to study the influence of the interaction between remittances and stock market liquidity on human capital development in emerging markets using panel data analysis. To a larger extent, migrants’ personal remittances had a positive impact on human capital development whilst stock market liquidity was found to have had a negative influence on human capital development. Though the results are not uniform across the three panel data analysis methods, the interaction between stock market liquidity and remittances had a negative effect on human capital development. The finding means that the presence of high stock market liquidity in emerging markets had a deleterious effect on remittances’ ability to enhance human capital development. The study therefore urges emerging markets to implement policies that keeps stock market liquidity at minimal levels in order to enhance migrant personal remittances’ impact on human capital development. Future studies should investigate other channels which facilitate migrant remittances’ influence on both human capital development and economic growth.

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