Impact of Overseas Remittances on Economic Growth: Evidences from Bangladesh

Wadood, Syed Naimul and Hossain, Md. Amzad (2015): Impact of Overseas Remittances on Economic Growth: Evidences from Bangladesh. Published in: The Dhaka University Studies [Journal of the Faculty of Arts] , Vol. 70, No. 1 [June, 2013] (1 July 2015): pp. 93-111.

Abstract

Overseas remittance earnings have become a major source of financial inflow for Bangladesh economy in recent years. However, the advantages of this huge remittance inflow may not be effectively channeled to the economic development via investment and/or efficiency effect. Therefore, the objective of this study is to investigate the nexus between remittances and economic growth in Bangladesh. Using time series data over a 40 year period 1972-2013, this paper investigates the causal link between overseas remittances and economic growth in Bangladesh by employing a number of econometric techniques namely Johansen Cointegration approach, Vector Error Correction (VEC) Model and the Granger Causality test. The cointegration test suggests that there exists a long-run relationship between remittance and economic growth in Bangladesh. Further, the result of Granger Causality shows that remittances do lead to economic growth in Bangladesh. The statistically significant relationship between remittances and economic growth may inspire the policy makers to consider remittances as an alternative policy instrument to motivate the growth of Bangladesh economy.

• Item Type: MPRA Paper
• Language: English
• Keywords: Overseas Remittance, Co-integration, Vector Error Correction Model, Johansen test for cointegration, Granger causality test, ECM Stability test
• Subjects: J - Labor and Demographic Economics > J0 - General > J01 - Labor Economics: General; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J61 - Geographic Labor Mobility ; Immigrant Workers; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity

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