Remittances and International Trade in Africa

Remittances have been recognized to support economic growth by affording alternate financial channels as formal channels to finance investment and also supporting the ease of liquidity constraints in household’s businesses. International trade also allows countries to expand their markets and access goods and services that otherwise may not have been available domestically. Increasing regional and economic integration has encouraged international trade as well as enhanced labour mobility and consequently increased flows of remittances across the globe. While each of both occurrences is encumbered with the movement of foreign currencies, which impacts other macroeconomic variables (inflation, interest rate, and unemployment) within an economy, the extant literature has not extensively studied these two phenomena together and consequently the relationships that exist between the two and their combined impact on economies. In this chapter, we provide an overview of remittances and their importance to Africa. We also discuss the importance of international trade. We then examine the link between remittances and international trade and how both affect African economies.