Emigrant’s remittances, Dutch Disease and capital accumulation in Pakistan

Taguchi, Hiroyuki and Batool, Bushra (2024): Emigrant’s remittances, Dutch Disease and capital accumulation in Pakistan.

Abstract

This paper examines macroeconomic impacts of emigrant remittances in Pakistan by using a vector autoregressive estimation framework. The contribution of this study is to investigate the threshold of remittance-GDP ratio that has real effects on the economy in terms of Dutch Disease and capital accumulation. Finding the threshold is significant because Pakistan has been one of the largest recipients of remittances in the world and her remittance inflows have experienced substantial fluctuations. The empirical results showed that: regarding the Dutch Disease effect, an increase in remittance-GDP ratio, if it exceeds the 6% threshold, leads to a decline in manufacturing-services ratio; and as for the capital accumulation effect, an increase in remittance-GDP ratio, when it exceeds the 5% threshold, leads to a decline in investment-consumption ratio. These outcomes suggested that the emigrants’ remittance inflows in Pakistan, if they exceed certain levels relative to GDP, have aggravated industrialization (Dutch Disease effect) and capital accumulation.

• Item Type: MPRA Paper
• Language: English
• Keywords: Pakistan, Emigrant remittances, Dutch Disease, Capital accumulation, Vector auto-regressive estimation
• Subjects: F - International Economics > F2 - International Factor Movements and International Business > F22 - International Migration; F - International Economics > F3 - International Finance > F39 - Other; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O53 - Asia including Middle East

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