Growth Effects of Remittances in Bangladesh: Is there a U‐shaped Relationship?

Abstract

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.

Nonlinear growth effect of remittances in recipient countries: an econometric analysis of remittances-growth nexus in Bangladesh

“…The IV-GMM results with robust standard errors show that there is a nonlinear relationship between remittances and per-capita GDP growth in Bangladesh and follows a U-shaped pattern. The result is comparable and complementary to the recent findings in Hassan et al (2016).…”

“…Recently, Hassan et al (2016) provided an alternative view on the remittancesgrowth literature by recognising that the developmental impact of remittances need not be linear. To be specific, they proposed and showed that a U-shaped relationship exists between remittances and long-run total factor productivity (TFP) growth, where the growth effects of remittances are initially negative but become positive later on.…”

Revisiting the threshold effect of remittances on total factor productivity growth in South Asia: a study of Bangladesh and India

“…Hassan, Chowdhury and Bhuyan (2016) find that remittances (% GDP) in the range from 0% to 14% lower TFP growth.…”

“…We use the framework developed by Rao and Hassan (2011) and Hassan, Chowdhury and Bhuyan (2016) and take Bangladesh and India as the sample countries. The choice of using Bangladesh and India as case studies is because they are one of the two largest recipients of remittances (in absolute terms) and these two countries have been examined in different fronts on remittances-growth nexus which enables us to compare with earlier studies.…”

“…For Bangladesh, Hassan, Chowdhury and Bhuyan (2016) examine the threshold level of remittances in relation to TFP growth, where the latter is computed using the method of Rao and Hassan (2011). Hassan, Chowdhury and Bhuyan (2016) find that remittances (% GDP) in the range from 0% to 14% lower TFP growth.…”