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Effect of International Remittances on Inflation in Ghana Using the Bounds Testing Approach

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  • Abdallah Abdul-Mumuni

  • Christopher Quaidoo

Abstract

This paper empirically examines the effect of international remittances on inflation in Ghana from 1979 to 2013 by incorporating international remittances as an exogenous variable to the standard inflation function. Applying the bounds testing approach, the empirical results indicate that international remittances have a significant effect on inflation in the long-run. However, in the short-run, no significant relationship is evident between these two variables. The study recommends that in order to reduce the effect of international remittances on inflation rate and increase the impact on growth, the government should improve public infrastructure. By this, excessive transfer fees would reduce and these remittances could be channeled into more productive sectors rather than being used mainly for consumption purposes.

Suggested Citation

  • Abdallah Abdul-Mumuni & Christopher Quaidoo, 2016. "Effect of International Remittances on Inflation in Ghana Using the Bounds Testing Approach," Business and Economic Research, Macrothink Institute, vol. 6(1), pages 192-209, June.
    • Handle: RePEc:mth:ber888:v:6:y:2016:i:1:p:192-209
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    References listed on IDEAS

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    1. Shahid Hussain Javaid, 2009. "Dutch Disease Investigated: Empirical Evidence from Selected South-East Asian Economies," SBP Working Paper Series 31, State Bank of Pakistan, Research Department.
    2. World Bank, 2014. "World Development Indicators 2014," World Bank Publications - Books, The World Bank Group, number 18237.
    3. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    4. Michael Clemens, 2007. "Do Visas Kill? Health Effects of African Health Professional Emigration," Working Papers 114, Center for Global Development.
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    Cited by:

    1. Saghir Pervaiz GHAURI & Rizwan Raheem AHMED & Jolita VVEINHARDT & Dalia STREIMIKIENE & Khalid Sarwar QURESHI, 2019. "The Effects of Remittances on Inflation (CPI and WPI) and Exchange Rate: A Case of Pakistan," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 146-165, June.
    2. Stephen Asafo Agyei, 2021. "The Dynamics of Remittances Impact: A Mixed-Method Approach to Understand Ghana’s Situation and the Way Forward," Social Sciences, MDPI, vol. 10(11), pages 1-21, October.
    3. Adnan KHURSHID & Yin KEDONG & Adrian Cantemir CALIN & Oana Cristina POPOVICI, 2016. "Do Remittances Hurt Domestic Prices? New Evidence from Low, Lower-Middle and Middle–Income Groups," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 95-114, December.

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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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