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Are the Direct and Indirect Growth Effects of Remittances Significant?

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  • B. Bhaskara Rao
  • Gazi Mainul Hassan

Abstract

Development economists believe that migrant workers’ remittances are an important source of funds for long run growth. Therefore, recent studies have investigated the growth effects of remittances and reached different conclusions. In many such studies the growth of output is simply regressed on both remittances and the channels through which remittances affect growth. Thus there is no distinction between the indirect and direct growth effects of remittances and such specifications may give unreliable estimates because of the correlation between the channels and remittances. In this paper we make a distinction between the indirect and direct effects of remittances. Our model is estimated with panel data of 40 high remittance recipient countries and a system GMM panel data estimation method.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal The World Economy.

Volume (Year): 35 (2012)
Issue (Month): 3 (03)
Pages: 351-372

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Handle: RePEc:bla:worlde:v:35:y:2012:i:3:p:351-372

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References

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  1. Rao, B. Bhaskara & Singh, Rup & Kumar, Saten, 2008. "Do we need time series econometrics," MPRA Paper 10530, University Library of Munich, Germany, revised 14 Sep 2008.
  2. Rao, B. Bhaskara & Tamazian, Artur & Kumar, Saten, 2009. "Systems GMM estimates of the Feldstein-Horioka puzzle for the OECD countries and tests for structural breaks," MPRA Paper 15312, University Library of Munich, Germany.
  3. Durlauf,S.N. & Johnson,P.A. & Temple,J.R.W., 2004. "Growth econometrics," Working papers, Wisconsin Madison - Social Systems 18, Wisconsin Madison - Social Systems.
  4. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  5. Acosta, Pablo A. & Lartey, Emmanuel K.K. & Mandelman, Federico S., 2009. "Remittances and the Dutch disease," Journal of International Economics, Elsevier, Elsevier, vol. 79(1), pages 102-116, September.
  6. Giuliano, Paola & Ruiz-Arranz, Marta, 2006. "Remittances, Financial Development, and Growth," IZA Discussion Papers 2160, Institute for the Study of Labor (IZA).
  7. Adams, Richard Jr. & Page, John, 2005. "Do international migration and remittances reduce poverty in developing countries?," World Development, Elsevier, Elsevier, vol. 33(10), pages 1645-1669, October.
  8. Aggarwal, Reena & Demirguc-Kunt, Asli & Martinez Peria, Maria Soledad, 2006. "Do workers'remittances promote financial development ?," Policy Research Working Paper Series 3957, The World Bank.
  9. Mark Rogers, 2003. "A Survey of Economic Growth," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 79(244), pages 112-135, 03.
  10. Dilip Ratha & Sanket Mohapatra & Ani Silwal, 2009. "Outlook for Remittance Flows 2009-2011 : Remittances Expected to Fall by 7-10 Percent in 2009," World Bank Other Operational Studies 10975, The World Bank.
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Cited by:
  1. Gazi M. Hassan & Mark J. Holmes, 2014. "Do Remittances Facilitate a Sustainable Current Account?," Working Papers in Economics, University of Waikato, Department of Economics 14/07, University of Waikato, Department of Economics.
  2. Bouoiyour, Jamal & Miftah, Amal & Selmi, Refk, 2014. "Do Financial Flows raise or reduce Economic growth Volatility? Some Lessons from Moroccan case," MPRA Paper 57258, University Library of Munich, Germany.
  3. Kumar, Ronald Ravinesh, 2013. "Remittances and economic growth: A study of Guyana," Economic Systems, Elsevier, Elsevier, vol. 37(3), pages 462-472.
  4. Sakib Mahmud & Gazi Mainul Hassan, 2014. "Consequences of Public Programs and Private Transfers on Household Investment in Storm Protection," Working Papers in Economics, University of Waikato, Department of Economics 14/01, University of Waikato, Department of Economics.
  5. Cooray, Arusha & Paradiso, Antonio & Truglia, Francesco Giovanni, 2013. "Do countries belonging to the same region suggest the same growth enhancing variables? Evidence from selected South Asian countries," Economic Modelling, Elsevier, Elsevier, vol. 33(C), pages 772-779.
  6. Gazi Mainul Hassan & Mohammed S. Bhuyan, 2013. "Growth Effects of Remittances:Is there a U-Shaped Relationship?," Working Papers in Economics, University of Waikato, Department of Economics 13/16, University of Waikato, Department of Economics.
  7. Gazi M. Hassan & Mark J. Holmes, 2013. "Remittances and the real effective exchange rate," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 45(35), pages 4959-4970, December.

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