This article shows that the effect of remittances on economic growth involves a U-shaped pattern, which is negative initially but later becomes positive. The analysis differs significantly from earlier studies in that it examines important methodological issues on the specification and estimation of the long-run growth effects of remittances by estimating their impact on total factor productivity (TFP) rather than on the growth rate of GDP, using time series data from Bangladesh. The use of single-equation cointegration methods shows that remittances' effect on long-run growth in Bangladesh is negative and falling until the remittances-to-GDP ratio is roughly eight per cent. The benefits of remittances receipts outweigh their costs and their net effects start to become positive when the ratio exceeds 14 per cent.
This study examines the impact of COVID-19 on the migrant workers and remittances flow to Bangladesh, the fastest growing South Asian country. Migrant workers have been playing an important role in propelling the economic activities of the country for a vast majority of the low-income population. Bangladesh is one of the major remittance recipient countries and earned US$21.8 billion in 2020. Over half a million workers from Bangladesh are employed in foreign countries annually, which eases the pressure on the domestic labour market considerably. However, the inflow of these enormous remittances has been encountered by various challenges including the ongoing COVID-19 pandemic, which has brought numerous adverse socio-economic impacts on the migrant workers. Policy recommendations suggest designing and implementing well-coordinated public–private migrant workers’ inclusive policies and creating a supportive environment for the returnee migrant workers to overcome this crisis. Initiating dialogues and negotiation with the employing countries to protect the jobs and workers’ rights can restore the employment and remittances during and after the pandemic, facilitate the expansion of the labour market across borders, and harness the valuable remittances for the overall welfare of the country.
Workers' remittance is one of the major sources of foreign exchange earnings for Bangladesh in recent years. It accounted for 12% of GDP in 2009 and has colossal socio-economic implications for the country. However, the inflows of foreign exchange earnings can exert adverse effects on the international competitiveness of an economy as postulated by the Dutch Disease theory. Using Johansen Cointegration and Vector Error Correction Model and annual data from 1971 to 2008, this paper investigates the effects of remittances on the external trade competitiveness as measured by the movements of real exchange rate of the country. The results of the study suggest that the influx of workers' remittances significantly appreciates the real exchange rate and deteriorates the external trade competitiveness of Bangladesh. While increased terms of trade indicates similar adverse effects, openness in goods and capital markets and nominal devaluation improve the trade competitiveness of the country. Therefore, greater trade openness and channelling remittances to the priority investment projects can be powerful policy devices to improve the external competitiveness and avert 'Dutch Disease' in Bangladesh.
Time series panel data estimation methods are used to estimate cointegrating equations for the demand for money (M1) for a panel of 11 OECD countries. The effects of financial reforms are analysed with structural break tests and estimates for alternative sub-samples. Our results in the post-reforms sub-samples show that the income elasticity of the demand for money has decreased and response to interest rate changes has increased.
Purpose: The purpose of this paper is to analyze the relationship between remittances and poverty through the human capital channel in developing countries, which has received less attention in the literature. Design/methodology/approach: The paper applied the system GMM developed by Arellano and Bond (1991) and Arellano and Bover (1995) containing 54 developing countries. This estimator is appropriate compared to a cross-section technique because it controls for the endogeneity of all explanatory variables, includes unobserved country-specific effects and allows for the inclusion of lagged dependent variables. Findings: The results suggest that, while remittances reduced poverty, the effect is moderated via education. A 1 percent increase in remittances reduces the poverty headcount by 0.47 percent, while the reduction is 0.33 percent via education. The marginal effect of remittances is negatively related to the level of education, indicating that education mitigates the effect of remittances on poverty. Practical implications: This paper includes the implications for the policymakers to justify the need for more effective approaches. It is useful to identify whether and how remittances and human capital interact in their effect on poverty when deciding the most desirable allocation of available resources between these two priorities. Originality/value This paper takes a step forward filling the limited evidence on the role of human capital in remittances-poverty relationship in developing countries. Different from the existing studies which have used the traditional panel estimators, this study utilizes the dynamic panel estimators such as system GMM to tackle the specification issues of endogeneity, measurement errors and heterogeneity.
This study examines the effect of education export on economic growth and development, using Australia as a case study since it is one of the top destinations for international students. International education has played a vital role in Australia's economy over the last three decades, becoming the third‐largest export of Australia after iron ore and coal and earning AU$40.3 billion in 2019. The sector supports about 250,000 jobs and provides an important source of skilled migrants for Australia. This study employs the cointegration and error correction model and quarterly data from 1974 to 2019 to analyse the effect of internationalisation of education on the Australian economy. The results suggest a long‐run positive relationship and a short‐run dynamic effect of international education on the economic growth and employment of Australia. The findings of this study have far‐reaching implications for other education‐exporting countries. Policy recommendations suggest taking proactive, flexible and innovative approaches to attract international students, and diversifying the market can support growth of the sector and enhance the economy‐wide spillover effects. The study further proposes sound and timely policies to promote the internationalisation of education to augment not only economic growth but also long‐run development for both education‐exporting and education‐receiving countries.
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