The Impact of Workers’ remittances On Economic Growth: Evidence from Kenya

Abstract

For many years workers’ remittances have grown to become a significant source of foreign exchange in many developing countries, however, workers’ remittances has not been given a big recognition as a source of economic growth in developing countries especially when considering that  remittances in Kenya continued to show an upward trend in the past. An explanatory design was used.  Data was collected for the periods 1970 to 2010. This study relied purely on secondary annual time series data. The analysis of the data will be carried out by OLS (Ordinary Least Squares) method. Time series Regression was used to analyze the data. we found that there is positive and highly significant relationship between workers’ remittances and real GDP per capita, indicating that higher economic growth is related with higher remittances. Further, we paper found a positive impact of gross capital formation and change of exchange rate regime from fixed to floating on economic growth. The government can improve their economic growth performance by reaping the contributions of workers’ remittances by reducing the cost of transactions of sending and receiving money from abroad.

Keywords;          Economic Growth, Workers’ Remittances