Brain drain or brain gain? investigating the diaspora’s effect on the economy and real estate bubble: new evidence from Kenya based on ARDL analysis

Bamahriz, Omar and Masih, Mansur (2018): Brain drain or brain gain? investigating the diaspora’s effect on the economy and real estate bubble: new evidence from Kenya based on ARDL analysis.

Abstract

The diaspora has often been castigated for the real estate bubble as a greater part of their remittances is invested in property. We therefore want to identify the relationship between these remittances, real estate prices and the GDP and employ the ARDL model to try and investigate whether there exists a long run relationship between them. This we believe would make a significant contribution to both the policy makers and academia due to scarce literature focused on the diaspora’s effect on the real estate prices in their home countries. We find no causal relationship between the remittances and the real estate bubble but find a trade-off in using the exchange rate to make housing more affordable at the expense of economic growth.

• Item Type: MPRA Paper
• Language: English
• Keywords: remittances, real estate prices, economic growth, ARDL
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C58 - Financial Econometrics; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location

References

Barajas, A., R. Chami, C. Fullenkamp, M. Gapen and Montiel, P. (2009): “Do workers’ remittances promote economic growth?” IMF Working Paper, Middle Eastern and Central Asia Department, 09 -153.

Barguellil, A., M. H. Zaiem and Zmami, M. (2013): Remittances, education and economic growth: a panel data analysis, Journal of Business Studies Quarterly, 4 (3), 129-139.

Cooray, A. (2012): The impact of migrant remittances on economic growth: evidence from south Asia, Review of International Economics, 20 (5), 985-998.

Fayissa, B. & Nsiah, C. (2010a). Can remittances spur economic growth and development? Evidence from Latin American countries (LACs). Department of Economics and Finance Working Paper Series.

Gapen, M. T., Chami, M. R., Montiel, M. P., Barajas, M. A., & Fullenkamp, C. (2009). Do workers' remittances promote economic growth? International Monetary Fund. Working Paper No: 9 -153

Grubel, H. G., Scott, A. (1966). The international flow of human capital. American Economic Review, 56 (1/2), 268–274.

Haque, N.U., Kim, S.J. (1995). A human capital flight: impact of migration on income and growth. IMF Staff Papers, 42(3), 577–607.

Jahjah, M. S., Chami, M. R., & Fullenkamp, C. (2003). Are immigrant remittance flows a source of capital for development ? International Monetary Fund, Working Paper No: 3 -189

Johnson, H. G. (1967). Some economic aspects of the brain drain. Pakistan Development Review, 7 (3), 379–411.

Jongwanich, J. (2007): Workers’ remittances, economic growth and poverty in developing Asia and the Pacific countries, UNESCAP Working Paper, WP/07/01.

Karagöz, K. (2009). Workers' remittances and economic growth: evidence from Turkey. Journal of Yaşar University, 4(13), 1891-1908.

Pesaran, B., & Pesaran, M. H. (2009). Time Series Econometrics Using Microfit 5.0, Oxford, Oxford University Press.

Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds Testing Approaches to the Analysis of Level Relationships. Journal of Applied Econometrics, 16(3), 289–326.

Rao, B. B., & Hassan, G. M. (2011). A panel data analysis of the growth effects of remittances. Economic modelling, 28(1-2), 701-709.

Siddique, A., E. A. Selvanathan and S. Selvanathan (2012): Remittances and economic growth: empirical evidence from Bangladesh, India and Sri Lanka, Journal of Development Studies, 48 (8), 1045-1062.

Spatafora, N. (2005). Two current issues facing developing countries. Washington, DC, World Bank.

Vargas-Silva, C. (2009). Crime and remittance transfers. Eastern Economic Journal, 35(2), 232-247.

Yaseen, H. S. (2012): The positive and negative impact of remittances on economic growth in MENA countries, The Journal of International Management Studies, 7 (1), 7-14.