The Impact of Remittances on Economic Growth in South Asia

Abstract

As in many developing nations, international migrant workers remittances are playing and will continue to play, a key role in economies of South Asia. Remittances are increasingly becoming an important source of external financing in economy embarking for reducing poverty and enhancing development at macro as well as micro level. Its contribution is important in earning foreign exchange, Balance of Payment support, boosting domestic aggregate demand, contributing to the GDP and stimulating of economic activities. The essence of this study is to examine the macroeconomic implications of cross-border remittances for economic growth prospects of South Asian economies

Bangladesh, India, Pakistan and Sri Lanka for the period, 1980-2012. The Random-effects panel model and OLS method are carried out for the empirical analysis. Using annual data from these countries, this study found that remittances contribute significantly to economic growth in Bangladesh and Pakistan in the short-run and in Sri Lanka in the long-run. There is no impact of remittances on economic growth in India. The structure of the paper is as follows. The first chapter describes the overview of international migration of workers and remittances in South Asia. The second chapter examines the existing literature review on theoretical and empirical studies of remittances and economic growth. The third and forth chapters present the empirical models used in this study and the results of the analysis, respectively. The paper ends with a conclusion and some policy implications of the findings of this study.