Causality Between Remittances and Economic Growth: Evidence From 4 Major South Asian Countries
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Remittances from migrant workers are progressively becoming a significant source of income from exports in many developing countries. The goal of this study is to examine the effects of remittance on economic growth in India, Bangladesh, Pakistan and Nepal using annual data from a moderately liberalized regime spanning from 1993 to 2022. The short-run and long-run relationships between remittances and economic growth were highlighted in this study using the Johansen co-integration test, the vector auto-regression model and vector error correction model. Granger causality tests are also used to evaluate whether there's an endogenous link between remittance and economic growth. This research finds a short-run positive relationship between remittances and economic growth, showing that remittances are more likely to contribute to India, Bangladesh and Nepal's short-term growth and only Pakistan has a short-run negative relation and also have long tern-run but negative relation. Using the Granger causality test examines the causal relationship between remittance per capita and economic growth in four countries: India, Bangladesh, Pakistan, and Nepal. We discovered that the rise in remittances did contribute to economic growth in Bangladesh and Nepal. But, in India and Pakistan, there is evidence that an increase in economic growth contributes to remittance growth.
Abstract
Remittances from migrant workers are progressively becoming a significant source of income from exports in many developing countries. The goal of this study is to examine the effects of remittance on economic growth in India, Bangladesh, Pakistan and Nepal using annual data from a moderately liberalized regime spanning from 1993 to 2022. The short-run and long-run relationships between remittances and economic growth were highlighted in this study using the Johansen co-integration test, the vector auto-regression model and vector error correction model. Granger causality tests are also used to evaluate whether there's an endogenous link between remittance and economic growth. This research finds a short-run positive relationship between remittances and economic growth, showing that remittances are more likely to contribute to India, Bangladesh and Nepal's short-term growth and only Pakistan has a short-run negative relation and also have long tern-run but negative relation. Using the Granger causality test examines the causal relationship between remittance per capita and economic growth in four countries: India, Bangladesh, Pakistan, and Nepal. We discovered that the rise in remittances did contribute to economic growth in Bangladesh and Nepal. But, in India and Pakistan, there is evidence that an increase in economic growth contributes to remittance growth.
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