THE EFFECT OF REMITTANCE ON HUMAN DEVELOPMENT IN ORGANIZATION OF ISLAMIC COOPERATION MEMBER COUNTRIES: EVIDENCE FROM DCCE AND CS-ARDL

Abstract

This study examined the effect of remittance inflows on human development in Organisation of Islamic Cooperation (OIC) member countries from 1990 to 2018. The study applied second-generation techniques. Based on the results of the second-generation unit roots test, our variables have mixed stationarity. Also, the result of the Westerlund cointegration technique showed that long-run relationships exist among the variables. In addition, the long-run and short-run coefficients from Dynamic Common Correlated Effects (DCCE) and Cross-sectional Autoregressive Distributive Lags (CS-ARDL) techniques revealed that remittances inflows promote human development. Moreover, financial development and foreign direct investment inflows positively impact human development, while the short-run coefficients are statistically insignificant. The causality test results showed a unidirectional causal link between remittance inflows and human development; between financial development and human development. In contrast, a bidirectional causal link was reported between foreign direct investment and human development. Therefore, the study concluded that remittance inflows promote human development in OIC member countries. The policymakers in OIC should consider policies that will attract migrants' workers to send remittances to their home country.