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The Impact of International Remittances on Public Debt Sustainability in Kerala: Evidence from the FMOLS Approach

Author

Listed:
  • Sabu Anjana

    (PhD, Head, Department of Economics, Christ University, Bangalore Yeshwanthpur Campus, Near Tumkur Road, Nagasandra, Bangalore, Karnataka, 560073, India)

  • Mohandas Vineeth

    (PhD, Head, Department of Economics, Christ University, Bangalore Yeshwanthpur Campus, Near Tumkur Road, Nagasandra, Bangalore, Karnataka, 560073, India)

Abstract

Remittances from Kerala’s migrant workers and professionals constitute a vital financial inflow, surpassing their relative significance in most other Indian states. With public debt nearing 60 % of NSDP, these transfers offer a potential buffer for debt sustainability. Applying Oates’ theory within Bohn’s debt-sustainability framework using an FMOLS model, and validated through Johansen testing, this study examines the remittance–debt nexus from 1980 to 2023. FMOLS results indicate a deterioration of debt sustainability despite substantial remittance inflows. The findings emphasize the need to reduce market borrowings, enhance the fiscal role of remittances, and promote policies supporting formal transfer channels, source diversification, remittance-linked investment, and financial literacy among migrant households to strengthen Kerala’s long-term fiscal resilience and enable more productive use of remittances.

Suggested Citation

  • Sabu Anjana & Mohandas Vineeth, 2025. "The Impact of International Remittances on Public Debt Sustainability in Kerala: Evidence from the FMOLS Approach," Statistics, Politics and Policy, De Gruyter, vol. 16(3), pages 331-358.
    • Handle: RePEc:bpj:statpp:v:16:y:2025:i:3:p:331-358:n:1002
    DOI: 10.1515/spp-2025-0004
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    Keywords

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories

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