Remittances Research Articles

Macroeconomic Impact of Value Added Tax in Nepal: A 2SLS and 3SLS Approach

The study’s aim to evaluate the impact of VAT on macroeconomic variables (TCON, GDP, Import (M) and GOVEXP) and the reverse effects of Macro variables on VAT. This study included macroeconomic development variables such as GDP, GDP (-1), VAT, remittance (REM), total consumption (TCON), export (X), import (M), gross fixed capital formation (GFCF), bank rate (BRATE), trade openness (TOPEN), government expenditure (GOVEXP) and one period lagged government expenditure (GOVEXP (-1)). However, this study has been enhanced over previous analyses by incorporating 45 years of nominal data from 1974/1975 to 2018/19. It examines the connection between VAT and significant macroeconomic variables such as GDP, GDP (-1), REM TCON, X, M, GFCF, BRATE, TOPEN, GOVEXP and GOVEXP (-1). To address the challenges of simultaneous equation bias and inconsistent findings, this study utilized the two-stage least squares (2SLS) and three-stage least squares (3SLS) methodologies to assess the impact of VAT on macroeconomic variables. The findings of the study are that value-added tax (VAT) negatively impacts TCON. VAT positively and significantly impacts on GDP, import(M), and GOVEXP. The study revealed that while TOPEN negatively affected Nepal’s GDP, GOVEXP, GFCF, and X had a significant and positive influence on GDP.

Migrant Workers Remittances in Fostering Country-of-origin Entrepreneurship and Financial Inclusion: Life Cycle-permanent Income Hypothesis

Migrant Workers Remittances in Fostering Country-of-origin Entrepreneurship and Financial Inclusion: Life Cycle-permanent Income Hypothesis

Interplay of Foreign Direct Investment, Remittances, and Economic Growth: Insights from SAARC Countries

The current study focuses on finding and analyzing the nexus between remittances, foreign direct investment, and economic growth in SAARC countries. This study uses secondary balanced data of selected SAARC countries for the years 2000 to 2019. This study uses gross domestic product i.e., GDP, which serves as the proxy of economic growth, as the dependent variable. The core independent variables of this study include (FDI) foreign direct investment and remittances (RMTN). Additionally, gross capital formation (GCF) and carbon dioxide emissions (CO2) are the other two independent variables in this study. For the proxy for environmental degradation the study uses data of CO2 emissions. The data is collected from the world development indicators, WDI. The study focuses on how all the independent variables affect the growth of economy in selected SAARC countries which include Pakistan, India, Bangladesh, Sri Lanka, and Nepal. The study applies cross sectional dependence test, panel cointegration test, unit root tests, and PARDL (panel auto regressive distributed lag model), also called pooled mean group methodology, to obtain empirical estimates. The results of PARDL show that FDI, RMTN, and GCF are all positively and significantly related to GDP. This means that GDP or alternatively economic growth, is improving with rise in FDI, RMTN, and GCF in selected SAARC countries. The results show that CO2 emissions have a negative significant impact on GDP i.e., increase in pollution levels is harmful for the growth of the selected economies.

Has Bangladesh’s Economic Progress Impacted by Carbon Emissions and Human Capital in the Long Run? An Econometric Auto-Regressive Distributed Lag (ARDL) Approach

The aim of this study is to investigate the outcome of human capital (proxied by government expenditure on education (GEE) and life expectancy (LE), carbon emission (CO2), domestic credit growth (DCG), labor force participation rate (LFPR) and remittances (RMT) on Bangladesh's economic progress as indicated by GDP per person. From 1990 to 2018, data for the analysis were used from the world development indicator. ARDL (Auto -regressive distributed lag model is used for the analysis and the cointegration test(F-bound test ) reveals that the value of F-statistics (32.83) is greater than I(1) bound(4.26) statistically 1 % significant level that confirms a sustained relationship throughout time between the variables being studied. Empirical results reveal that DCR, LE and RMT have significant and positive long-term effect on GDPPC. Conversely, carbon emission, GEE, LFPR and GCF have a long-term negative effects.

Analyzing the Dynamics between Foreign Exchange Reserves, Trade Balance, Workers Remittances and Balance of Payments in Nepal

This study explores the intricate dynamics among foreign exchange reserves, trade balance, workers' remittances, and the balance of payments (BOP) in Nepal, crucial for economic stability and policy formulation in a developing economy. Utilizing data from the Nepal Rastra Bank spanning from June 2017 to April 2024, the research employs statistical and econometric methods, including the Phillips-Perron test, ARDL model, Error Correction Model (ECM), and Granger causality analysis, to investigate the relationships and causal interactions among these variables. Key findings reveal significant long-term relationships, particularly highlighting how foreign exchange reserves are influenced by the trade balance and workers' remittances. The results suggest that maintaining optimal foreign exchange reserves is vital for mitigating trade and BOP deficits, which, in turn, impacts economic stability. The study's insights are crucial for policymakers aiming to develop strategies that enhance economic growth and resilience in Nepal.

Does Greylisting Affect the Workers’ Remittances to their Home Country? A Case Study of Pakistan

Inward forward remittances are an important source of foreign reserves for Pakistan and they are also conducive in maintaining the current account deficit at a manageable level. In this article, the author has attempted to gauge the impact of FATF grey listing on the inward foreign remittances of Pakistani workers employed abroad. The time series data spanning from 2001-2022 has been used to estimate these effects using the ARDL time series estimation method and bounds testing technique for cointegration. It has been estimated that no statistically significant effect of greylisting on workers’ remittances exists either in the short or in the long run. This is in tandem with various studies that have found that FATF listing does not necessarily have a conclusive or negative effect on the economic variable(s). However, the estimates suggest that there exists a statistically significant relationship between the exchange rates and the workers’ migration stocks in the short and the long run. The result(s) of the study adds to the existing literature because to the author's knowledge, no prior work has been done regarding the impact of greylisting on the workers’ remittances sent to the home country and this effect has not been studied individually in the case of a developing country like Pakistan. Furthermore, the available literature suggests that in general, not much work has been done to estimate the impact of greylisting or blacklisting on the country’s economy; the results available in the existing literature are also mixed; where some studies report unconclusive impacts whereas other studies report a negative impact of greylisting on the economic aspects they analysed.

The Moderating Role of Institutional Quality in the Relationship between Foreign Capital Inflows and Stock Market Development: A Panel Data Analysis

The study examines the impact of foreign capital inflows (FCI) on stock market development (SMD), with a specific focus on the moderating role of institutional quality (IQ). The study uses a panel dataset of 28 emerging economies for the period of 1998 to 2022. The findings reveal that both international remittances (REM) and foreign portfolio investment (FPI) have a significant positive impact on SMD. These findings imply that REM inflows enhance the availability of financial resources in the economy, promoting stock market growth and stability. Similarly, FPI increases market liquidity and fills the saving-investment gap in the host country, thereby increasing SMD. However, the results show that foreign direct investment (FDI) has a significant negative impact on SMD. This finding implies that FDI could negatively affect SMD in the host country due to the diversion of investments from the stock market to other business ventures, profit repatriation, and crowding-out effects on domestic investment by creating strong competition in the input market, making it difficult for listed domestic firms to operate. Moreover, the study reveals two unique and interesting findings. First, official development assistance (ODA) has a significant negative impact on SMD, suggesting that ODA reduces SMD due to the misallocation of resources due to aid conditions and economic instability, and the crowding-out effect on private investments. Second, IQ positively moderates the relationship between all forms of FCI and SMD in the sampled countries, implying that host countries with a good institutional framework and high IQ tend to experience high SMD.

Path to achieving SDG 8: do worker remittances reduce vulnerable employment?

PurposeThe prevalence of high levels of vulnerable employment in developing countries poses a formidable obstacle to their progress towards achieving SDG 8. While worker remittances (remittances) are widely recognised as a potential source of improving the welfare of people experiencing poverty, their effectiveness in alleviating vulnerable employment from a macro perspective remains unclear. Consequently, the study examines the impact of remittances on reducing vulnerable employment.Design/methodology/approachThe study uses macro-level data from 73 developing countries covering 1990–2021. Vulnerable employment is measured in three forms: total, male, and female. Remittances are measured as a percentage of the gross domestic product. The findings are empirically analysed using dynamic panel data estimation techniques. A two-stage least squares (IV 2SLS) approach addresses remittance endogeneity.FindingsTwo key findings emerge from the study. First, increased remittances are associated with a decline in the total share of workers resorting to vulnerable employment, albeit a modest decline. Second, the remittance surge is associated with more males than females leaving vulnerable employment, indicating its gender-specific effects. These findings remain robust to several checks.Practical implicationsThe study's findings underscore the potential of leveraging remittances to reduce vulnerable employment. To this end, selective and targeted policy interventions that promote financial literacy and inclusion, which serve as the cornerstones for effectively utilising remittances, are advised.Originality/valueTo the best of my knowledge, this study is the first to examine the impact of remittances on vulnerable employment on a macro scale. As such, the study makes a novel contribution to understanding how remittances serve as an enabler for SDG 8.

Repurchase Intentions of Money Remittance Centers’ Customers in SOCCSKSARGEN: A Structural Analysis

The paper aimed to understand the drivers of commitment, aspects of commitment, trust, and repurchase intention of money remittance center customers on their choice of money remittance center in the selected cities of SOCCSKSARGEN. Data were gathered from 410 respondents throughout the four key cities in the SOCCSKSARGEN Region using purposive random sampling. A self-constructed questionnaire was utilized during the data gathering procedure. Using descriptive statistics, the research found that the respondents were mostly female, aged 20 to 29 years old. Employees and students comprised about eighty-five percent of the respondents. The majority were using their preferred money remittance for more than one year but less than three years, and about thirty-five percent were making a money remittance transaction once per month. The results of the regression and structural equation modeling were consistent in finding that only affective and calculative commitment had a significant influence on the repurchase intentions of customers in money remittance centers and that trust predicted all aspects of commitment. Economic, social, and resource drivers influenced customer commitment, which supported Lacey’s driver of commitment model. The results of SEM suggested the high influence of trust towards relationship quality building among money remittance center customers.

Remittances, Debt Service Payments and Economic Growth in Nigeria

The study investigates the intricate relationship between the effects of remittances (REMIT) and debt service payments (DSP) on economic growth (RGDP) as well as other key variables, external reserve (ER), foreign direct investment (FDI), and external debt (EXTD) on economic growth (RGDP) in Nigeria from 1995 to 2021. Various statistical techniques, such as Ordinary Least Square (OLS), Augmented Dickey Fuller (ADF) tests and ARDL, were used. The result indicates the existence of a positive correlation between RGDP and FDI; DSP and ER exhibit a moderate negative correlation, while REMIT and DSP show a strong negative correlation. ER and REMIT indicate a correlation, while EXTD and ER indicate a negative correlation. All variables are I(1) and the ARDL Bound test for co-integration indicates that a long-run relationship exists between dependent and independent variables. ARDL estimation shows that only the coefficient of external debt is significant. The R2 shows that 84% of the variation in RGDP is explained by the independent variables. The test for autocorrelation (DW = 2.33) indicates no autocorrelation in the error term.
 This study recommends that policymakers should implement measures to attract and retain foreign investments, given the positive impact of FDI on RGDP, and Policymakers should explore strategies to channel remittances into productive sectors, such as investments in infrastructure, education, and small-scale enterprises.

Impact of Remittance on Financial Sector Growth in Nigeria: An Econometrics Approach

Remittance inflow is one of the major sources of foreign exchange not only to individuals and financial institutions but also to the economy as a whole. The level of remittance to Nigeria has been on the increase, yet the exchange rate has been very unstable with the naira falling against the USD dollars consistently. Despite different literature on the impact of remittance on the Nigerian economy as a whole, limited studies have been carried out on the effects of remittance on the financial sector of the economy. This study investigated the impact of remittance on the financial sector in Nigeria using data between 1986 and 2022. The choice of the period is to capture the effect on the Structural Adjustment Program (SAP) on the economy while also considering other macroeconomic factors and shocks in period thereafter. An Autoregressive Distributed Lag (ARDL) was employed. Evidence from the results revealed a long-run relationship between financial sector output, Remittances (REM), Cost of remittance (CRM), Trade Openness (TRO) and Exchange Rate (EXR). Meanwhile the cost of remittance was found insignificant. The empirical findings from the ARDL result show that there is a positive relationship between financial sector output, remittance inflow, cost of remittance, trade openness and exchange rate in Nigeria. Based on the empirical findings, the study recommended that government should employ policies that will encourage judicious utilization of funds received through remittances by channelling the funds into productive investment as it will encourage more inflow of remittances and make policy measures more stable to attract more remittances.

Asymmetric Analysis of the Impact of Foreign Capital Inflows on Economic Growth in Nigeria

Foreign capital inflows remain volatile and their impact on economic growth remains uncertain due to persistent challenges relating to policy inconsistence insufficient infrastructure and fluctuations in Global oil price. The volatility of these inflows posed challenges, raises concern on their impact on economic growth. This study examined the impact of foreign capital inflows on economic growth in Nigeria from 1990 – 2023.The variables of interest are real gross domestic product (RGDP), foreign direct investment (FDI), remittance (REM) foreign portfolio investment (FPI) official development assistance (ODA) external debt (ED) government expenditure on health (GEH) and government expenditure on education (GEE).This study employed a Nonlinear Autoregressive Distributed lag (NARDL) model and Granger causality test. The finding from the NARDL model showed that Foreign Direct Investment, Remittances, Official Development Aid, External Debt, government expenditure on health, and government expenditure on education all exhibit substantial impacts, with positive changes in these variables associated with increased economic growth, and negative changes leading to decreased economic growth in both short and long run period. The finding further revealed significant asymmetric impacts between Foreign Direct Investment, Remittances, Official Development Aid, government expenditure on health, and government expenditure on education with exception of External debt in the short run .This study recommends that to unlock Nigeria’s full growth potential, policymakers should boost absorptive capacity of the economy through improve infrastructure, security, and legal frameworks to effectively utilize incoming capital and accelerate sustainable economic growth. Furthermore, prioritize health and education spending to develop a skilled and healthy workforce, ultimately boosting domestic activity and productivity.

Financial Development and Trade Openness Economic Growth Nexuses in Pakistan: Evidence from ARDL Cointegration Approach

Many studies have drawn conflicting conclusions about relationships between labour transfers, monetarily buildup, growth, and living standards in different settings, but only partially so. For this purpose, the capital and threshold conduction effects are often used to trace transmission channels for causal links. On the other hand, workers' remittances play a key role in the financial development of the economy. No study has specifically focused on the effects of worker transfers on living standards in Pakistan by monitoring the main and threshold transfer channels. Thus, there is a considerable need to explore these channels and their expansion. This study examines the effect of workers' remittances on living standards by expanding the capital conduit and threshold channels. The study scrutinizes the direct impact of financial development on living standards by tracing the threshold effect channel. Second, it channels the influence of financial development with living standards through the capital channel for GDP growth. Third, it examines the unintended effect of labour transfers on living standards by the financial development and GDP growth based on extended versions of capital leadership and threshold channels. to estimate bidirectional causal relationships between financial development and GDP growth. The data were taken for the period 1980–2020. Employing ARDL-bound (cointegration) testing, the study's results indicate a direct and indirect long and short-term relationship between worker transfers and living standards if we consider the effects of financial development and GDP growth. Furthermore, it is confirmed that the extension of the journey contributed significantly. Policymakers can use these findings to understand better worker remittances' role in developing financially sound strategies.

Trade, Foreign Capital, and Productive Capacity Nexus: The Moderating Role of Institutions

International trade and foreign capital inflows are considered significant determinants of economic growth. However, despite being the largest recipients of these inflows, South Asian economies fail to achieve sustainable economic development due to rapid changes in macroeconomic dynamics and political instability. The purpose of the study is to examine the impact of trade openness (TRD), foreign direct investment (FDI), and international remittances (REM) on the productive capacity (PC) of South Asian economies, with a focus on the moderating effects of the institutional quality (INQ) on the aforementioned relations. The study uses the sample of four South Asian countries namely: Bangladesh, India, Pakistan, and Sri Lanka for the period from 2000 to 2022. The empirical results show that TRD, REM, and INQ exhibit positive and statistically significant effects on PC. The results highlight the significance of international trade, foreign capital inflows, and INQ in determining the PC of South Asian economies. Notably, the findings indicate that FDI has no impact on the PC of the sample economies. Surprisingly, INQ negatively moderates the relationship between REM and PC. Furthermore, INQ positively moderates the impact of TRD on PC. However, INQ does not moderate the effect of FDI on PC in the sample countries. The conclusion section discusses the policy and practical implications of the study, as well as its limitations.

Macroeconomic Determinants of the Stock Market in Nepal: An Empirical Analysis

The stock market plays a critical role in the field of the economic sector of a country, facilitating capital flow to businesses and reflecting the national economic health. The purpose of this study was to conduct an empirical analysis of co-integration and causality tests between the stock market and macroeconomic factors. The study used indicators such as the consumer price index (CPI), exchange rates (EXR), money supply (MS), and remittances (REMIT) to determine their potential impact on stock market dynamics. To analyze the data collected from June 2005 to November 2023, advanced econometric models like co-integration were employed to explore long-term equilibrium. Vector auto-regression (VAR) was used to analyze the impact and Grangers’ causality tests were used to identify cause and effect. The results of the VAR model emphasized the market index's (INDEX) dependency on its own lagged values, with insignificant influence from consumer prices (CPI) and money supply (MS), but significant effects from exchange rates (EXR), and remittances (REMIT). Granger causality tests revealed no causality between CPI, MS, and REMIT in the INDEX. However, this test exhibited a significant causality from EXR to INDEX. This highlights the predictive power of exchange rates on the stock market.

Status of the economy and key challenges faced by the healthcare sector in Sri Lanka

Ceylon College of Physicians (CCP) chose the theme of ‘Holistic care amidst constraints’ for the Annual Academic Sessions 2023. As the Chief Guest, I was invited to present an independent economist’s perspective on the current status of the economy and to share some thoughts on two key challenges currently faced by the healthcare sector in Sri Lanka, namely the brain drain and the funding of healthcare. The first part of this paper sets out the key contributory factors that caused the current economic crisis and the policy measures taken at present to reverse these to stimulate a sustainable economic recovery. The success of these reforms so far based on key economic indicators such as exchange rate, interest rates, inflation, GDP growth, foreign exchange reserves, government revenue, trade deficit, worker remittances and tourism earnings, are examined thereafter. Areas of concern which require attention to ensure sustainability of the process and to ensure that nobody is left behind, are highlighted.Causes and remedies of brain drain are discussed, looking beyond those which look obvious but are currently unfeasible due to the state of the economy. The pace of emigration needs to be slowed while adapting to the challenges posed by this inevitable phenomenon and learning to live with it. Regarding funding of healthcare, issues faced by the current two-tiered system in Sri Lanka are examined, particularly the high level of out-of-pocket spending.Different models adopted by countries such as the UK, Canada, France, Germany, Japan, and the USA are looked at. A model for Sri Lanka to consider adopting is proposed to help reach the goal of Universal Health Coverage and an attempt is made to chart a path to fulfil this vision.

Impact of financial development on economic growth in Nigeria

The study investigated the impact of financial development on economic growth in Nigeria utilising annual data from 1985 to 2022 sourced from the Central Bank of Nigeria Statistical Bulletins and World Bank indicators. The variables used in this study were real gross domestic product (RGDP), a proxy for economic growth as the dependent variable while credit to the private sector, a proxy for financial deepening, all share index (ASI), nominal exchange rate (ER), gross savings (GS), remittances (REM) and financial technology (Fin-Tech_dum) were all used as financial development indicators which are the independent variables. The method of analysis employed was the Auto-regressive Distributed Lag (ARDL) and the pairwise granger casualty test. The ARDL long run results show that all share index, exchange rate and financial technology positively and significantly affects economic growth; credit to the private sector and gross savings positively but insignificantly impacts on economic growth. However, remittances reveal a negative and insignificant impact on economic growth in Nigeria. The Pairwise causality test shows that there are three unidirectional causality which runs from economic growth to credit to private sector, financial technology and gross savings in Nigeria. In conclusion, the findings of the study validate the demand-following theory in Nigeria. The policy recommendation suggests that the Central Bank of Nigeria should promote the adoption of advanced financial technologies and implement cautious expansionary monetary policies in specific sectors to encourage investment and economic growth. Overall, these measures would boost investment and economic growth in the country.

Threshold Impact of Remittances on Real Exchange Rates for WAEMU: A Panel Smooth Transition Regression Approach

This paper explores the nonlinear relationship between workers’ remittances and real effective exchange rates for West African Economic and Monetary Union (WAEMU) member countries using the panel smooth transition regression (PSTR). The PSTR was estimated with one transition function and one location parameter as dictated by the diagnostic tests. The diagnostic tests reveal that the relationship between workers’ remittances and real effective rates is nonlinear. The estimated threshold value is 3.07%. The results reveal that increases in workers’ remittances have a depreciating effect on real effective exchange rates in regime one, associated with threshold value of less than 3.07%. However, in the second regime when the threshold value is greater than or equal to 3.07%, increases in workers remittances have an appreciating impact on real effective exchange rates. These results substantiate that the relationship between workers’ remittances and real effective exchange rates is asymmetric and as such should be modeled accordingly. Above all, the results confirm the presence of Dutch disease effect in the second regime where the estimated coefficient on workers’ remittances is negative and statistically significant. However, there is no evidence of Dutch disease effect in the first regime where the regression coefficient on workers remittances is positive and also statistically significant. Policy implications are discussed.

How Do Remittance Inflows Cause the Dutch Disease in the Financial Sector? The Role of Financial Risk and Human Capital

This research examines whether the remittance (REM) inflows cause Dutch disease and how it affects financial development (FD). The sample consists of the top global REM recipients, namely China, Egypt, India, Mexico and the Philippines, based on the latest World Bank data from 1990 to 2019. This study employs three econometric models to evaluate the REM inflows’ impact on FD. Using the cross-sectionally augmented autoregressive distributed lag (CS-ARDL) estimation technique, we reveal that the REM inflows have impeded FD and have triggered Dutch disease issues in the financial sectors. Furthermore, the estimation found a positive effect of economic growth, globalization, human capital and financial risks on FD across all models, both in the short and long runs. In addition, the interplay among the REM, human capital, and financial risks also facilitates FD. The study suggests that robust resource flows and price adjustment processes tackle the hazard of deteriorating FD and emphasize the Dutch disease’s effects on the top REM recipients.

Financial Literacy and Personal Financial Planning among the Households of Migrant Workers in Rainas Municipality, Lamjung, Nepal

Worker's remittances are one of the most crucial sources of income, contributing significantly to poverty alleviation in households and communities in many parts of the developing world. A pressing concern is whether individuals will be able to maintain their current standard of living upon permanently returning to Nepal. Therefore, the aim of this study is to identify the different factors that affect personal financial planning among migrant households. The study employs an explanatory research design to examine the relationship between various factors that influence the personal financial planning of migrant households. It utilizes a purposive sampling method, collecting data from 100 respondents across 10 wards in Rainas Municipality, along with 10 randomly selected respondents. Data is collected through Google Forms and analyzed using SPSS (version 21), SPSS AMOS, and MS-Excel. The results reveal that the majority of households earn around 45,000 to 60,000 per month, indicating a healthy income inflow. The structural equation modeling (SEM) analysis shows that financial awareness (β= 0.218, P<0.05) has a significant relationship with financial planning, while financial knowledge (β= -0.085, P>0.05) and financial attitude (β= 0.044, P<0.05) do not have a significant relationship with financial planning. This study suggests that financial awareness is a key factor in increasing financial knowledge and improving financial attitudes, ultimately enhancing financial planning in households. To promote such awareness, the government can consider incorporating financial courses into school curricula to enhance financial literacy and personal financial planning.