Remittances and investment nexus in Bangladesh: an ARDL bounds testing approach
Bangladesh is the 8th largest remittance recipient country in the world and one of the heavily dependent (11 % of GDP) countries of remittances. Despite its importance in policy making in developing countries like Bangladesh, there is absence of any study regarding the effect of remittances on the level of investment. In an attempt to fill the gap, we examine the cointegrating property and stability of the relationship among these variables using the ARDL bounds testing approach combined with CUSUM and CUSUMSQ tests. Our findings show that both remittances and trade openness positively and significantly influence the level of investment in Bangladesh, meaning that contrary to most conclusions found in the literature, migrant remittances in developing countries are not entirely spent in basic consumption needs. We also find that foreign aid has very little and insignificant impact on investment. Finally, we find long-run unidirectional causal relationship running from remittances to investment indicating that favorable policies to increase the flow of remittance will promote investment in Bangladesh. Copyright Springer-Verlag Berlin Heidelberg 2013
Volume (Year): 60 (2013)
Issue (Month): 4 (December)
|Contact details of provider:|| Web page: http://www.springer.com/economics/journal/12232|
|Order Information:||Web: http://link.springer.de/orders.htm|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paresh Kumar Narayan, 2005. "The saving and investment nexus for China: evidence from cointegration tests," Applied Economics, Taylor & Francis Journals, vol. 37(17), pages 1979-1990.
- Pahlavani, M., 2005. "Sources Of Economic Growth In Iran: A Cointegration Analysis In The Presence Of Structural Breaks, 1960-2003," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 5(4).
- Razin, Assaf & Sadka, Efraim & Yuen, Chi-Wa, 1998.
"A pecking order of capital inflows and international tax principles,"
Journal of International Economics,
Elsevier, vol. 44(1), pages 45-68, February.
- Razin, A & Sadka, E & Yuen, C-W, 1997. "A Pecking Order of Capital Inflows and International Tax Principles," Papers 12-97, Tel Aviv - the Sackler Institute of Economic Studies.
- Ziesemer, Thomas, 2008.
"Growth with Endogenous Migration Hump and the Multiple, Dynamically Interacting Effects of Aid in Poor Developing Countries,"
MERIT Working Papers
057, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
- Thomas Ziesemer, 2011. "Growth with endogenous migration hump and the multiple, dynamically interacting effects of aid in poor developing countries," Applied Economics, Taylor & Francis Journals, vol. 43(30), pages 4865-4878.
- Levine, Ross & Renelt, David, 1991.
"A sensitivity analysis of cross-country growth regressions,"
Policy Research Working Paper Series
609, The World Bank.
- Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
- M. Bahmani-Oskooee & Gour Goswami, 2003. "A disaggregated approach to test the J-Curve phenomenon: Japan versus her major trading partners," Journal of Economics and Finance, Springer, vol. 27(1), pages 102-113, March.
- El-Sakka, M. I. T. & McNabb, Robert, 1999. "The Macroeconomic Determinants of Emigrant Remittances," World Development, Elsevier, vol. 27(8), pages 1493-1502, August.
- Shawn Kanaiaupuni & Katharine Donato, 1999. "Migradollars and mortality: The effects of migration on infant survival in Mexico," Demography, Springer, vol. 36(3), pages 339-353, August.
- Gazi Salah Uddin & Phouphet Kyophilavong & Nasim Sydee, 2012. "The Casual Nexus of Banking Sector Development and Poverty Reduction in Bangladesh," International Journal of Economics and Financial Issues, Econjournals, vol. 2(3), pages 304-311.
- Alejandra Cox Edwards & Manuelita Ureta, 2003. "International Migration, Remittances, and Schooling: Evidence from El Salvador," NBER Working Papers 9766, National Bureau of Economic Research, Inc.
- Gordon, R.H. & Bovenberg, A.L., 1994.
"Why Is Capital So Immobile Internationally?: Possible Explanations and Implications for Capital Income Taxation,"
358, Research Seminar in International Economics, University of Michigan.
- Gordon, Roger H & Bovenberg, A Lans, 1996. "Why Is Capital So Immobile Internationally? Possible Explanations and Implications for Capital Income Taxation," American Economic Review, American Economic Association, vol. 86(5), pages 1057-75, December.
- Roger H. Gordon & A. Lans Bovenberg, 1994. "Why is Capital so Immobile Internationally?: Possible Explanations and Implications for Capital Income Taxation," NBER Working Papers 4796, National Bureau of Economic Research, Inc.
- Gordon, R.H. & Bovenberg, A.L., 1994. "Why is capital so immobile internationally? : Possible explanations and implications for capital income taxation," Discussion Paper 1994-63, Tilburg University, Center for Economic Research.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
- Martin Feldstein & Charles Horioka, 1979.
"Domestic Savings and International Capital Flows,"
NBER Working Papers
0310, National Bureau of Economic Research, Inc.
- Joshua Greene & Delano Villanueva, 1991. "Private Investment in Developing Countries: An Empirical Analysis," IMF Staff Papers, Palgrave Macmillan, vol. 38(1), pages 33-58, March.
- Nicholas P. Glytsos, 2005. "The contribution of remittances to growth: A dynamic approach and empirical analysis," Journal of Economic Studies, Emerald Group Publishing, vol. 32(5), pages 468-496, October.
- Woodruff, Christopher & Zenteno, Rene, 2007. "Migration networks and microenterprises in Mexico," Journal of Development Economics, Elsevier, vol. 82(2), pages 509-528, March.
- Barro, Robert J, 1991.
"Economic Growth in a Cross Section of Countries,"
The Quarterly Journal of Economics,
MIT Press, vol. 106(2), pages 407-43, May.
- Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
- Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
- Funkhouser, Edward, 1992. "Migration from Nicaragua: some recent evidence," World Development, Elsevier, vol. 20(8), pages 1209-1218, August.
- Djajic, Slobodan, 1986. "International migration, remittances and welfare in a dependent economy," Journal of Development Economics, Elsevier, vol. 21(2), pages 229-234, May.
- Poirine, Bernard, 1997. "A theory of remittances as an implicit family loan arrangement," World Development, Elsevier, vol. 25(4), pages 589-611, January.
- Stark, Oded & Bloom, David E, 1985. "The New Economics of Labor Migration," American Economic Review, American Economic Association, vol. 75(2), pages 173-78, May.
- World Bank, 2010. "World Development Indicators 2010," World Bank Publications, The World Bank, number 4373.
- Osili, Una Okonkwo, 2004. "Migrants and Housing Investments: Theory and Evidence from Nigeria," Economic Development and Cultural Change, University of Chicago Press, vol. 52(4), pages 821-49, July.
- Miguel León-Ledesma & Matloob Piracha, 2001. "International Migration and the Role of Remittances in Eastern Europe," Studies in Economics 0113, School of Economics, University of Kent.
- Alice Mesnard, 2004. "Temporary migration and capital market imperfections," Oxford Economic Papers, Oxford University Press, vol. 56(2), pages 242-262, April.
- Jorge Durand & William Kandel & Emilio Parrado & Douglas Massey, 1996. "International migration and development in mexican communities," Demography, Springer, vol. 33(2), pages 249-264, May.
- Bahmani-Oskooee, Mohsen, 2001. "How stable is M2 money demand function in Japan?," Japan and the World Economy, Elsevier, vol. 13(4), pages 455-461, December.
- Paresh Kumar Narayan & Russell Smyth, 2006. "Higher Education, Real Income and Real Investment in China: Evidence From Granger Causality Tests," Education Economics, Taylor & Francis Journals, vol. 14(1), pages 107-125.
- Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
- Shrestha, Min B. & Chowdhury, Khorshed, 2005. "ARDL Modelling Approach to Testing the Financial Liberalisation Hypothesis," Economics Working Papers wp05-15, School of Economics, University of Wollongong, NSW, Australia.
- Russell, Sharon Stanton, 1986. "Remittances from international migration: A review in perspective," World Development, Elsevier, vol. 14(6), pages 677-696, June.
- Sebastian Edwards, 1991.
"Trade Orientation, Distortions and Growth in Developing Countries,"
NBER Working Papers
3716, National Bureau of Economic Research, Inc.
- Edwards, Sebastian, 1992. "Trade orientation, distortions and growth in developing countries," Journal of Development Economics, Elsevier, vol. 39(1), pages 31-57, July.
- Adams, Richard H, Jr, 1998. "Remittances, Investment, and Rural Asset Accumulation in Pakistan," Economic Development and Cultural Change, University of Chicago Press, vol. 47(1), pages 155-73, October.
- Odhiambo, Nicholas M., 2009. "Electricity consumption and economic growth in South Africa: A trivariate causality test," Energy Economics, Elsevier, vol. 31(5), pages 635-640, September.
- Bovenberg, A.L. & Gordon, R.H., 1996. "Why is capital so immobile internationally? Possible explanation and implications for capital income taxation," Other publications TiSEM 6a131c21-fd9a-4d83-8d9a-7, Tilburg University, School of Economics and Management.
- Halicioglu, Ferda, 2009.
"An econometric study of CO2 emissions, energy consumption, income and foreign trade in Turkey,"
Elsevier, vol. 37(3), pages 1156-1164, March.
- Halicioglu, Ferda, 2008. "An econometric study of CO2 emissions, energy consumption, income and foreign trade in Turkey," MPRA Paper 11457, University Library of Munich, Germany.
- Tang, Chor Foon, 2008. "A re-examination of the relationship between electricity consumption and economic growth in Malaysia," Energy Policy, Elsevier, vol. 36(8), pages 3067-3075, August.
- Subrata Ghatak & Jalal Siddiki, 2001. "The use of the ARDL approach in estimating virtual exchange rates in India," Journal of Applied Statistics, Taylor & Francis Journals, vol. 28(5), pages 573-583.
- M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
- Ghosh, Sajal, 2010. "Examining carbon emissions economic growth nexus for India: A multivariate cointegration approach," Energy Policy, Elsevier, vol. 38(6), pages 3008-3014, June.
- Narayan, Paresh Kumar & Smyth, Russell, 2008. "Energy consumption and real GDP in G7 countries: New evidence from panel cointegration with structural breaks," Energy Economics, Elsevier, vol. 30(5), pages 2331-2341, September.
- Acaravci, Ali & Ozturk, Ilhan, 2010. "On the relationship between energy consumption, CO2 emissions and economic growth in Europe," Energy, Elsevier, vol. 35(12), pages 5412-5420.
When requesting a correction, please mention this item's handle: RePEc:spr:inrvec:v:60:y:2013:i:4:p:387-407. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Christopher F Baum)
If references are entirely missing, you can add them using this form.