Interrelationship between Remittances and Economic Growth: Evidence from SAARC Countries

Abstract

The basic purpose of this paper is to investigate the role of foreign remittances in the performance of the economy of Pakistan. The selected variables in this study were gross domestic product (GDP), remittances (REM), gross fixed capital formation (GFCF), population (Pop), gross national expenditure (GNE), and imports (Imp). GDP is taken as the dependent variable and we investigate the impact of all remaining independent variables on GDP. This study used the panel data throughout 2002-2019. The data is collected from World Development Indicator (WDI). This study implies a unit root test to observe stationary of data and a model of Panel Auto Regressive Distributive Lag for Specification of data. To analyze short-run and long-run associations among variables, coefficients of variables are measured. Remittances, GFCF, and GNE have a positive impact on gross domestic product whereas Pop and Imp are negatively correlated with the GDP. However, remittances have strongly affected economic growth and play an important role to boost up economic growth of selected developing countries.