Long-Run and Short-Run Relationship Between Remittances and GDP Per Capita Growth, Evidence from Balkans Countries

Abstract

This research study aims to explore the link between remittances as percentage of GDP and GDP per capita growth in six Balkans countries and Kosovo for the period 2007-2020. Panel cointegration based on dynamic ordinary least squares (DOLS) model was applied to check the magnitude of the potential long-run coefficients between the remittances as percentage of GDP and GDP per capita growth. In addition, the pairwise Granger causality tests were performed to capture the causal link among these two variables. The findings from the DOLS model indicate a positive association between remittance’s inflows and GDP per capita growth in the long-run. DOLS short–run relationships showed that the value of variable-remittances as percent of GDP has predictable properties to be a leading and lagging factor for these countries in the coming years. Results from the Granger causality confirm causality in unilateral direction running from remittance’s inflow to GDP per capita growth.