Remittances and Financial Inclusion: The Role of Institutional Quality in Belt and Road Initiative Economies

Abstract This study examines the remittances and financial inclusion nexus by subsuming the critical role of institutional quality in the unique settings of Belt and Road Initiative (BRI) economies. The existing literature pertaining to the role of institutional quality in remittances and financial inclusion has placed less emphasis on the multidimensional nature of financial inclusion. Therefore, this study contributes to the debate on the role of institutions in explaining the nexus between remittances and financial inclusion. By adopting two-stage least squares (2SLS) and generalized methods of moments (GMM) estimation techniques, the empirical findings show that institutional quality plays a significant role in explaining the relationship between remittances and financial inclusion across various dimensions. The overall findings are further confirmed by applying a series of robustness checks such as the adoption of alternative measure of financial inclusion and institutional quality, alternative instruments and alternative estimator. The study offers useful policy implications for governments, regulatory agencies, and other stakeholders in BRI partners economies. GEL Classification: F24; G15; G28