Remittances and Economic Growth: Empirical Evidence from Bangladesh

Abstract

The objective of this paper has been to investigate the causal relationship between remittances and economic growth in Bangladesh over the period 1972/73 to 2014/15. A stable, long-run relationship is found between the two variables on the basis of cointegration test. Furthermore, a one-way causation from remittances to economic growth is also observed through the Error Correction Model (ECM). The analysis indicates a positive impact of remittances on economic growth. As a policy suggestion, an appropriate environment for investing the remitted money must be created. Besides, a reliable and rapid remittances transaction system should also be developed so that the emigrants are encouraged to send money through the ‘formal’ channel.

Keywords: Remittance, Economic Growth, Coitegration, Error Correction Model, Bangladesh.