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Workers’ remittances impact on the economic growth: Evidence from capital inflows in Bangladesh

Kundu, Nobinkhor and Banu, Asma and Sehreen, Farhana (2012): Workers’ remittances impact on the economic growth: Evidence from capital inflows in Bangladesh. Published in: The Jahangirnagar Journal of Business Studies , Vol. 2, No. 1 (29 June 2012): pp. 153-167.

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Abstract

This paper examines the macroeconomic determinants of workers’ remittances in Bangladesh. Multiple regressions find that the macroeconomic variables such as real gross domestic product (RGDP), workers’ remittances (WREMI), foreign direct investment (FDI), official development assistant (ODA), inflation rates (INFRAT) of Bangladesh have significant impact on RGDP. The study focused on the importance of WREMI inflow and its implication for economic growth in Bangladesh. Using time series data over a 35 year period, by using estimated multiple regressions approach, we analyze the impact of WREMI inflow on economic growth in Bangladesh for the period 1976-2010. WREMI income increased from low $24 million in 1976 to over $11.1 billion in 2010 (WDI, 2011). WREMI is one of the major sources of foreign exchange earnings and it exceeded FDI and ODA inflows to the developing countries (World Bank, 2006) and we found that growth in WREMI does lead to economic growth in Bangladesh. The paper also discusses economic growth issues arising from the results of the analysis in relation to WREMI in association with macroeconomic determinants. This determinant is statistically significant, supporting a mediating effect of investment between WREMI and economic growth and shows that WREMI effect on growth of RGDP positively and significant impact on foreign reserves in both the short run and long run.

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