Do personal remittances cause environmental pollution? Evidence from the top eight remittance-receiving countries.

Abstract

This study aims to examine the asymmetric impact of personal remittances on environmental pollution with financial development (FD) as an explanatory variable. It utilizes annual panel data on the top eight remittance-receiving countries and employs panel generalized least square (GLS) method, pooled mean group (PMG) model, and the Dumitrescu-Hurlin (D-H) panel causality test to realize the objective. The GLS estimation reveals that both the positive and negative components of remittances mitigate CO2 emission in the long run, while FD increases the pollution level. The PMG estimation also provides similar results and validates the robustness of the GLS model estimation outcomes. The D-H causality test provides several unidirectional and one bidirectional causality. FD causes environmental quality. There is a feedback relationship between the positive component of remittances and environmental pollution, while there is one-way causation from the negative component of remittances to CO2 emissions. Both positive and negative shocks of remittances cause FD, and positive shock of remittances causes that of negative shocks. The outcomes suggest that the policymakers may formulate agreeable rules and incentives for the financial institutions to finance environmental-friendly economic projects and production processes and channel the personal remittances through banking channels to mitigate CO2 emissions.