The Effect of Foreign Remittances on the Economic Growth of Pakistan Economy

Abstract

The present study empirically inspected with time-series data the effect of external remittances on Pakistan’s economic growth from 1974-2019. For the data analysis, the unit root test for stationary and other techniques like the ARDL bound test for long-term co-integration and ECM for short-term is used. Research evidence revealed that foreign remittances, consumption, domestic savings, and exports seem to be positive and statistically significant with economic growth in the long run. While imports are statistically significant, but there is an inverse relation to Pakistan's economic growth. Nevertheless, in the short-term that foreign remittance is statistically significant with a negative relationship to GDP. Besides, the result shows that there are no problems of autocorrelation, Hetroskedasticity, and Multicollinearity.

Keywords: Foreign remittance, ARDL bound test, ECM, autocorrelation, Hetroskedasticity, Multicollinearity.

DOI: 10.7176/IKM/10-7-03

Publication date:October 31^st 2020