Impact of oil prices on remittances to Pakistan from GCC countries: evidence from panel asymmetric analysis

Abstract

International migration and remittances from oil-exporting Gulf countries are important sources of employment, income, and foreign exchange for Pakistan. This study investigates the asymmetric impact of oil prices on remittances to Pakistan from GCC countries, over the period 1980 to 2018, by employing the recently advanced non-linear panel Pooled Mean Group (PMG) model. The findings show that oil prices and remittance are asymmetrically associated. The increasing oil prices have a significant positive effect only in the long run; whereas, reducing oil prices reveal a significant negative effect only in the short run. Findings of other explanatory variables show that the economic condition in host countries, exchange rate, and trade relations have positive effects only in the long run; whereas the economic condition in the home country has significant negative effects in the long run and positive effect in the short run. This study urges oil exports to stabilize oil supply and prices, and Pakistan to enhance trade relations, exchange rate adjustments, and financial development..

Macroeconomic determinants of remittances to India

“…That means a one percent change in the exchange rate leads to a − 0.68 percent reduction in remittances to India. This finding suggests substitution effect in remittance sending behaviour and agrees with the findings of Ojede et al ( 2019 ), Akçay and Karasoy ( 2019 ), and Abbas ( 2020 ).…”

“…The migrants with investment motives exploit the exchange rate fluctuations and send more money to the home country to accumulate durable or fixed assets. This positive impact of domestic currency depreciation on remittances is found in Pakistan and India in the long-run (Akçay and Karasoy 2019 ; Abbas 2020 ). On the contrary, Ojede et al ( 2019 ) point out that domestic currency depreciation reduces remittances to Uganda.…”

Examining the asymmetric effects of oil price shocks on remittances inflows: evidence from Nigeria

“…As pointed out by Akcay and Karasoy (2019b) and Abbas (2020), oil prices and remittances are closely linked together. There are two main channels through which changes in oil prices affect remittances.…”

“…If one looks at it from the perspective of migrant-exporting and oi-producing countries, increase oil prices will raise domestic prices, and increase the cost of living of the migrants' families. Consequently, altruistically motivated remittances to the home country will increase (Makhlouf and Kasmaoui 2018;Akcay and Karasoy 2019a;Abbas 2020). However, viewed from the perspective of oil-exporting and labor-importing countries, an increase in oil prices will lead to an increase in oil revenue.…”

“…However, viewed from the perspective of oil-exporting and labor-importing countries, an increase in oil prices will lead to an increase in oil revenue. As a result, investment and economic growth will be enhanced, influencing aggregate demand and the demand of migrant workers and hence increased remittance to home countries (Sasikumar and Martin 2017;John 2018;Naufal and Termos 2009;Abbas 2020).…”