Effect of Remittance on Savings, Investment, and Reserve: A Panel Data Analysis on South Asian Countries
DOI:
https://doi.org/10.53808/KUS.2024.21.02.1176-ssKeywords:
Remittance; national savings; investment; foreign reserveAbstract
This study aims to investigate the effect of remittance on national savings, investment, and per capita reserve in South Asian countries. This study analyses a panel database of countries, including Bangladesh, India, Pakistan, Sri Lanka, Nepal, Bhutan, and the Maldives, for the timespan 1990-2021. Data were extracted from the World Development Indicators (WDI) and the World Economic Outlook (WEO). Before panel regression analysis, the Levin-Lin-Chu and Breitung unit root tests were performed simultaneously to examine whether the panels were stationary at the level or the first difference. After satisfying the conditions, Fixed and Random Effect regression models were executed to investigate whether remittance influences national savings, investment, and per capita reserve. The Hausman tests confirmed the appropriateness of Fixed Effect models. The results demonstrate that remittance positively and significantly affects the selected countries' investment, national savings, and per capita reserve. Remittance is the outcome of international migration; hence, the government should focus on sending more migrants to attractive international destinations that offer higher wages, a better work environment, and job security. The focus should be on lowering the cost of remittance transmission and providing incentives to motivate migrants to remit more using a formal channel.
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