Does Remittance Promote Socio-Economic Development? Evidence from Bangladesh

Abstract

Bangladesh is promoting remittance inflows as it has become one of the main sources of foreign exchange. This paper investigates how remittances promote socio-economic development in Bangladesh by using the time series data for the period of 1990-2020. Unit root test shows that all variables are stationary at first difference. That is, integrated of order one I(1). The long-run relationship is ensured by the Johansen Cointegration approach. Finally, we use Vector Error Correction Model (VECM) to estimate the impact. The results confirm that remittances and HDI in Bangladesh are interrelated long-run. The long-run coefficient indicates that an increase in remittance inflow will promote socio-economic development measured by HDI. For the disaggregate Level, we examine the impact of remittances on per capita GDP, life expectancy, and years of schooling. In the long run, remittances promote per capita GDP, life expectancy, and years of schooling.