Can Foreign Remittances Accelerate Economic Growth? An Empirical Analysis for China

Abstract

Using Johansen’s co-integration test, this paper is conducted to investigate the effect of foreign remittances on economic growth by collecting time series data from 1982 to 2015 from the world data bank. Results indicate that there is a long run relationship between foreign remittances and economic development. Furthermore study applies error correction model ECM to detect the short run adjustment in variables to attain equilibrium in the long run. The results show that remittances have a significant positive impact on China economic growth both in the long run and in the short run, indicating that remittances can accelerate China economic growth. The conclusion suggests that remittances in China are currently profit- driven and a considerable share of remittances has already entered production investment.

Keywords: Foreign remittances, Economic growth , Time Series Analysis