Remittances, Development Level, and Long-Run Economic Growth
Abstract
:1. Introduction
2. Literature Review
3. Data and Methodology
3.1. Source and Brief Analysis of Data
3.2. Econometric Model of Remittance Impact on Long-Run Economic Growth
4. Empirical Analysis
5. Summary of Empirical Results
6. Conclusions
Author Contributions
Conflicts of Interest
Appendix A. Sample of Countries
Afghanistan | Egypt, Arab Rep. | Sri Lanka | Paraguay |
Albania | Estonia | Lesotho | Qatar |
Armenia | Fiji | Lithuania | Romania |
Antigua and Barbuda | United Kingdom | Latvia | Russian Federation |
Australia | Georgia | Macao SAR, China | Rwanda |
Benin | Ghana | Morocco | Sudan |
Burkina Faso | Grenada | Moldova | Senegal |
Bangladesh | Guatemala | Madagascar | El Salvador |
Bulgaria | Hong Kong | Maldives | Serbia |
Bosnia and Herzegovina | Honduras | Mexico | Suriname |
Belize | Croatia | Macedonia, FYR | Slovak Republic |
Brazil | Hungary | Mali | Sweden |
Barbados | Indonesia | Mongolia | Seychelles |
Bhutan | India | Mozambique | Togo |
Botswana | Iran, Islamic Rep. | Mauritius | Thailand |
Switzerland | Iceland | Malaysia | Trinidad and Tobago |
Chile | Israel | Namibia | Tunisia |
Cote d’Ivoire | Jamaica | Nigeria | Turkey |
Cameroon | Jordan | Nicaragua | Tanzania |
Congo, Rep. | Japan | Norway | Uganda |
Colombia | Kazakhstan | Nepal | Ukraine |
Cabo Verde | Kenya | New Zealand | Uruguay |
Costa Rica | Kyrgyz Republic | Oman | United States |
Cyprus | Cambodia | Pakistan | Venezuela, RB |
Czech Republic | St. Kitts and Nevis | Panama | Vanuatu |
Dominica | Korea, Rep. | Peru | West Bank and Gaza |
Denmark | Lao PDR | Philippines | South Africa |
Dominican Republic | Lebanon | Papua New Guinea | Congo, Dem. Rep. |
Algeria | St. Lucia | Poland | Zambia |
Appendix B. Variables and Explanation 1
Variable (Name in the Equations) | Description |
---|---|
Long-run economic growth (lrgrwth) | Measured as growth of real per capita GDP in constant PPP dollars. |
Development level (dev) | Measured as log of real per capita GDP in constant PPP dollars. PPP GDP is gross domestic product converted to international dollars using purchasing power parity rates. Data are in constant 2011 international dollars. |
Remittances (rem) | Log of personal remittances, received (current US$). Personal remittances comprise personal transfers and compensation of employees. Personal transfers consist of all current transfers in cash or in kind made or received by resident households to or from non-resident households. Personal transfers thus include all current transfers between resident and non-resident individuals. Compensation of employees refers to the income of border, seasonal, and other short-term workers who are employed in an economy where they are not resident and of residents employed by non-resident entities. Data are the sum of two items defined in the sixth edition of the IMF’s Balance of Payments Manual: personal transfers and compensation of employees. Data are in current U.S. dollars. |
Remittances intensity in the economy (remint) | Measured as log of Personal remittances, received (% of GDP) |
Controls | |
Investment (invGDP) | Gross Fixed Capital Formation (formerly gross domestic investment) (% of GDP) |
Fiscal Balance (fb) | Ratio between Tax revenue and Expense, %. |
Tax revenue refers to compulsory transfers to the central government for public purposes. Certain compulsory transfers such as fines, penalties, and most social security contributions are excluded. Refunds and corrections of erroneously collected tax revenue are treated as negative revenue. | |
Expense is cash payments for operating activities of the government in providing goods and services. It includes compensation of employees (such as wages and salaries), interest and subsidies, grants, social benefits, and other expenses, such as rent and dividends. | |
Openness (opn) | Exports plus Imports as a share of GDP, %. |
Inflation (cpi) | Percentage change in Consumer price index (2010 = 100) |
Population growth (pop) | Log difference of Population |
Credit (crdGDP) | Domestic credit to private sector by banks (% of GDP). Domestic credit to private sector by banks refers to financial resources provided to the private sector by other depository corporations (deposit taking corporations except central banks), such as through loans, purchases of non-equity securities, and trade credits and other accounts receivable, that establish a claim for repayment. For some countries these claims include credit to public enterprises. |
Liquid liabilities (m2GDP) | Money and quasi money (M2) as % of GDP. Money and quasi money comprise the sum of currency outside banks, demand deposits other than those of the central government, and the time, savings, and foreign currency deposits of resident sectors other than the central government. |
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Author | Research Period | Research Sample | Research Methods | Research Results |
---|---|---|---|---|
Feeny et al. [40] | 1971–2010 | 136 developing countries | Ordinary Least Squares | Remittances have no impact on per capita income growth |
Nwaogu, Ryan [41] | 1970–2009 | 53 African, 34 Latin American and Caribbean countries | Dynamic spatial-lag model | Positive impact of the remittances on economic growth |
Tahir et.al. [42] | 1977–2013 | Pakistan | Autoregressive Distributed Lag Model | Remittances have a significant positive impact on economic growth |
Olubiyi [43] | 1980–2012 | Nigeria | VECM Granger causality | Unidirectional causality |
Zizi [44] | 1995–2011 | CEE countries | Panel regression | Remittances have positive impact on economic growth |
Kumar, Vu [45] | 1980–2012 | Vietnam | Autoregressive distributed lag (ARDL) co-integration, Granger causality | Bidirectional causality between remittances and economic growth |
Imai et al. [46] | 1980–2009 | Asia and Pacific countries | Panel data analysis | Remittances have positive impact on economic growth |
Nyeadi, Atiga [47] | 1980–2012 | Ghana | Johansen and Juselius co-integration test, Granger causality test | Unidirectional causality from remittances to economic growth |
Kumar, Stauvermann [48] | 1979–2012 | Bangladesh | ARDL co-integration, Granger causality test | Positive in the long run, bidirectional causality |
Salahuddin, Gow [49] | 1977–2012 | Bangladesh, India, Pakistan and the Philippines | Panel co-integration tests, Pooled Mean Group (PMG) regression | Positive in the long run, statistically insignificant impact in the short run |
Lim, Simmons [50] | 1990–2012 | Caribbean Community and Common Market | Panel co-integration test | No significant relationship between remittances and economic growth in the long run |
Jouini [51] | 1970–2010 | Tunisia | ARDL co-integration | No impact on the economic growth in the long run and bidirectional causality between remittances and growth in the short run |
Region of the World | Number of Countries out of Total in Region | Part of the Sample, % | Income Group | Number of Countries out of Total in Income Group | Part of the Sample, % |
---|---|---|---|---|---|
East Asia & Pacific | 16 out of 36 | 14 | High income: non-OECD | 17 out of 47 | 14 |
Europe & Central Asia | 29 out of 57 | 25 | High income: OECD | 18 out of 32 | 15 |
Latin America & Caribbean | 25 out of 41 | 22 | High income | 35 out of 79 | 29 |
Middle East & North Africa | 11 out of 21 | 9 | Upper middle income | 36 out of 53 | 33 |
North America | 1 out of 3 | <1 | Lower middle income | 33 out of 51 | 28 |
South Asia | 7 out of 8 | 6 | Low income | 12 out of 31 | 10 |
Sub-Saharan Africa | 27 out of 48 | 23 | |||
Total | 116 out of 214 | 100 | Total | 116 out of 214 | 100 |
Pooled OLS | Pooled OLS with FD Transformation 1 | FE | |
---|---|---|---|
Constant | −0.9192 *** | 0.09543 *** | 8.511 *** |
(0.2891) | (0.01910) | (2.622) | |
Initial development level | −0.006061 | 0.3162 *** | −0.5473 *** |
(0.01367) | (0.07614) | (0.08700) | |
Remittances | 0.01150 ** | 0.01483 ** | 0.01390 ** |
(0.005006) | (0.006089) | (0.006607) | |
Investment | 0.1324 *** | 0.1530 *** | 0.1678 *** |
(0.03368) | (0.02827) | (0.03322) | |
Fiscal balance | 0.02867 | 0.1046 *** | 0.1088 ** |
(0.03201) | (0.03650) | (0.04648) | |
Openness | 0.005256 | −0.09449 ** | −0.07334 * |
(0.01825) | (0.04016) | (0.03970) | |
Consumer price index | −0.07368 ** | −0.06471 ** | −0.07139 *** |
(0.03393) | (0.02852) | (0.02638) | |
Population | 0.0009954 | −0.3216 ** | −0.3245 ** |
(0.005688) | (0.1264) | (0.1300) | |
Credit | 0.005385 | 0.05299 ** | 0.01603 |
(0.02292) | (0.02179) | (0.02450) | |
Liquid liabilities | −0.01788 | 0.01564 | 0.06326 |
(0.02437) | (0.05194) | (0.05280) | |
n | 352 | 232 | 352 |
Number of countries | 116 | 105 | 116 |
Adj. R2 | 0.2262 | 0.4693 | 0.6634 |
p-value AR(1) test | 0.0815 | 0.2903 | 0.0672 |
Pooled OLS | Pooled OLS with FD Transformation 1 | FE | |
---|---|---|---|
Constant | 5.525 *** | −0.003382 | 5.396 *** |
(0.6645) | (0.009669) | (1.314) | |
Initial development level | −0.6358 *** | 0.02573 | −0.9675 *** |
(0.06453) | (0.03178) | (0.03874) | |
Remittances | −0.2873 *** | −0.3526 *** | −0.3626 *** |
(0.03028) | (0.02778) | (0.03316) | |
Remittances * Initial development level | 0.03157 *** | 0.03905 *** | 0.04021 *** |
(0.003251) | (0.002721) | (0.003304) | |
Investment | 0.06425 ** | 0.05164 *** | 0.05258 ** |
(0.02793) | (0.01584) | (0.02072) | |
Fiscal balance | −0.001501 | 0.03683 ** | 0.03379 |
(0.02514) | (0.01678) | (0.02519) | |
Openness | −0.01014 | −0.02939 | −0.03825 * |
(0.01562) | (0.01782) | (0.01982) | |
Consumer price index | −0.006905 | −0.04996 *** | −0.03760 ** |
(0.01563) | (0.01823) | (0.01854) | |
Population | −0.01108 ** | −0.2141 *** | −0.1765 ** |
(0.005282) | (0.07422) | (0.07605) | |
Credit | 0.004893 | 0.01521 * | 0.01265 |
(0.01454) | (0.008869) | (0.01184) | |
Liquid liabilities | 0.01738 | 0.02869 | 0.04727 * |
(0.01901) | (0.02465) | (0.02805) | |
n | 352 | 232 | 352 |
Number of countries | 116 | 105 | 116 |
Adj. R2 | 0.6271 | 0.8623 | 0.8987 |
p-value AR(1) test | 0.0714 | 0.3080 | 0.0592 |
Pooled OLS | Pooled OLS with FD Transformation 1 | FE | |
---|---|---|---|
Constant | −0.5402 | 0.08035 *** | 7.942 *** |
(0.3460) | (0.01676) | (2.446) | |
Initial development level | −0.06134 * | 0.2778 *** | −0.5994 *** |
(0.03348) | (0.06191) | (0.07787) | |
Remittances | 0.05499 ** | 0.1195 *** | 0.1227 *** |
(0.02362) | (0.03279) | (0.03795) | |
Remittances * Remittances-to-GDP ratio | −0.02296 ** | −0.05108 *** | −0.04953 *** |
(0.001090) | (0.001859) | (0.002032) | |
Remittances-to-GDP ratio | −0.06454 * | −0.02750 | −0.02688 * |
(0.01357) | (0.02502) | (0.01426) | |
Investment | 0.1320 *** | 0.1204 *** | 0.1316 *** |
(0.03438) | (0.03026) | (0.03311) | |
Fiscal balance | 0.02102 | 0.1040 *** | 0.09756 ** |
(0.03236) | (0.03254) | (0.04005) | |
Openness | 0.01820 | −0.05457 | −0.04463 |
(0.01787) | (0.04653) | (0.04291) | |
Consumer price index | −0.04915 | −0.05352 * | −0.04446 |
(0.03049) | (0.02858) | (0.03218) | |
Population | −0.03939 * | −0.3938 *** | −0.3952 *** |
(0.02181) | (0.1090) | (0.1168) | |
Credit | 0.005487 | 0.04199 ** | 0.007871 |
(0.02161) | (0.01794) | (0.02121) | |
Liquid liabilities | 0.008399 | 0.02680 | 0.07520 |
(0.02396) | (0.04403) | (0.04578) | |
n | 352 | 232 | 352 |
Number of countries | 116 | 105 | 116 |
Adj. R2 | 0.2425 | 0.5409 | 0.7084 |
p-value AR(1) test | 0.0900 | 0.2602 | 0.0610 |
Average Real per Capita GDP in Constant PPP U.S. Dollars | |||
---|---|---|---|
Below 8500 | Above 8500 | ||
Average Remittances-to-GDP ratio, % | Above 11 | A | B |
Albania, Armenia, Bosnia and Herzegovina, Cabo Verde, Jamaica, Kyrgyz Republic, Lesotho, Moldova, Nepal, El Salvador, West Bank and Gaza | Jordan, Lebanon | ||
Below 11 | C | D | |
Afghanistan, Benin, Burkina Faso, Bangladesh, Belize, Bhutan, Cote d’Ivoire, Cameroon, Congo, Rep., Egypt, Arab Rep., Fiji, Georgia, Ghana, Guatemala, Honduras, Indonesia, India, Kenya, Cambodia, Lao PDR, Sri Lanka, Morocco, Madagascar, Mali, Mongolia, Mozambique, Namibia, Nigeria, Nicaragua, Pakistan, Peru, Philippines, Papua New Guinea, Paraguay, Rwanda, Sudan, Senegal, Togo, Tunisia, Tanzania, Uganda, Ukraine, Vanuatu, Congo, Dem. Rep., Zambia | Antigua and Barbuda, Australia, Bulgaria, Brazil, Barbados, Botswana, Switzerland, Chile, Colombia, Costa Rica, Cyprus, Czech Republic, Dominica, Denmark, Dominican Republic, Algeria, Estonia, United Kingdom, Grenada, Hong Kong SAR, China, Croatia, Hungary, Iran, Islamic Rep., Iceland, Israel, Japan, Kazakhstan, St. Kitts and Nevis, Korea, Rep., St. Lucia, Lithuania, Latvia, Macao SAR, China, Maldives, Mexico, Macedonia, FYR, Mauritius, Malaysia, Norway, New Zealand, Oman, Panama, Poland, Qatar, Romania, Russian Federation, Serbia, Suriname, Slovak Republic, Sweden, Seychelles, Thailand, Trinidad and Tobago, Turkey, Uruguay, United States, Venezuela, RB, South Africa |
© 2016 by the authors; licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC-BY) license (http://creativecommons.org/licenses/by/4.0/).
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Matuzeviciute, K.; Butkus, M. Remittances, Development Level, and Long-Run Economic Growth. Economies 2016, 4, 28. https://doi.org/10.3390/economies4040028
Matuzeviciute K, Butkus M. Remittances, Development Level, and Long-Run Economic Growth. Economies. 2016; 4(4):28. https://doi.org/10.3390/economies4040028
Chicago/Turabian StyleMatuzeviciute, Kristina, and Mindaugas Butkus. 2016. "Remittances, Development Level, and Long-Run Economic Growth" Economies 4, no. 4: 28. https://doi.org/10.3390/economies4040028
APA StyleMatuzeviciute, K., & Butkus, M. (2016). Remittances, Development Level, and Long-Run Economic Growth. Economies, 4(4), 28. https://doi.org/10.3390/economies4040028