Affiliations: School of Management and Economics, Beijing Institute of Technology, Beijing, China
Correspondence:
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Corresponding auhtor: Muhammad Mobeen Shafqat, School of Management and Economics, Beijing Institute of Technology, 5 South Zhongguancun Street, Haidian District, Beijing, China. Tel.: +86 136 8327 0502; E-mail: mobeen.shafqat@gmail.com.
Abstract: This empirical study’s intent was to assess the role that remittances play in the economic growth and self-development of low-income country regions. The diverse results in previous studies necessitate using a proper methodological approach. Namely panel co-integration analysis allows gauging the long-run interactions among growth, remittances, and self-development. Having confirmed, via the augmented Dickey-Fuller (ADF) test, the dynamic equilibrium of the data, gleaned from 31 low-income countries over the 1991–2015 time period, the cointegration between economic growth and remittances was established through the Johansen panel test. Pertinent to heterogeneous cointegrated panels, the fully modified ordinary least squares (FMOLS) results show that remittances have a significant, positive effect on long-term economic growth. Besides, the study’s empirical results also unconceal the significant, long-term effects of economic growth and remittances, facilitating self-development in low-income regions, in terms of finance, savings, trade, and labor-force participation, except that of household consumption. And an endogeneity test strongly suggests the need for policymaking towards obtaining maximum benefits from the increased inflows of remittances. Despite its limitations, the study offers pragmatic policymaking recommendations, along with future research directions.
