How Does Remittance Impact on Economic Development in South Asia? A Dynamic Ordinary Least-Square Approach

Abstract

This paper aims to examine the impacts of remittances on the economic development of four South Asian countries: Bangladesh, India, Pakistan and Sri Lanka. The study considers the World Bank’s balanced panel data (1977–2017). The dynamic ordinary least-square approach finds mixed results, which explain the realisation of the pluralistic approach. Evidence shows that remittances directly increase gross domestic product, household consumption and expenditure and decreases government consumption expenditure, inflation and population growth. However, the flow of remittances is not promoting private bank credit; rather it increases import-dominated trade. Besides, remittances are yet to be significant at gross capital formation. Therefore, we recommend that policymakers should find a way to bring remittance through formal channels for capital formation and investment. Fortunately, remittance inflows indirectly cause population control and sustainability. Decision-makers should also formulate policies that will modify remittance-induced current production and consumption patterns to promote the process of sustainable development further.