Impacts of Personal Remittances on Economic Growth: A Panel Data Analysis

Abstract

Purpose: Remittance has become one of the most important sources of foreign currency inflows toward lower- and middle-income countries. Every year its significance is increasing both in size and in growth rate. Now, as it is evident that this has stumbled amid the worldwide outbreak of the Novel Corona virus pandemic, trying to find out how much this strike may hamper economies, this study attempts to observe the impacts of personal remittances on economic growth using panel data consisting of 102 countries from 1998-2018. Methodology: To analyze the data collected from World Bank and IMF for this study, the fixed effects multiple regression model has been used. Findings: For all the countries in the sample there found a weak relationship between remittances and growth, but the coefficients are statistically insignificant. The same goes for the question of whether there is any non-linearity in the effect of personal remittances. Also, the effects of remittances on economic growth don‟t change with the countries‟ level of income. Practical Implications: These outcomes imply that personal remittances don‟t invariably affect economic growth but need proper policy support and wise usage to be usefully affecting growth which has important practical implications for policymakers and future studies on remittances. Limitations: Some of the highest remittances receiving countries could not be included in this study due to the unavailability of necessary data.