The impact of remittances on economic growth in Nepal: an analysis of a significant basis of development

Abstract

This study analyses the impact of remittances on economic growth in Nepal by assessing the effects of remittances on financial development, productivity, international trade, and human capital accumulation. Based on an analysis of relevant data, it finds that increasing inflows of remittances in Nepal have a positive association with financial development and human capital accumulation, but a negative association with international trade. In terms of two factors of productivity – entrepreneurship and manufacturing–which are potentially associated with inflows of remittances, it finds a positive association (though not very significant) of remittances with entrepreneurship, but a negative association with manufacturing. Overall, this indicates a mixed (both positive and negative) impact of remittance inflows on economic growth in Nepal.