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Remittances inflow and private investment: a case study of South Asian economies via panel data analysis

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  • Zeeshan Khan
  • Fazli Rabbi
  • Manzoor Ahmad
  • Yang Siqun

Abstract

This study examines the association between remittances inflow and investment. The data of five major South Asian countries that receive a significant portion of remittances including India, Sri Lanka, Pakistan, Nepal, and Bangladesh are considered from 1990 to 2016. Pooled ordinary least square (OLS), the fixed effect within group estimator (FEWGE), fixed effect (FE) and random effect (RE) are used for the analysis of the data. Unit root tests were employed and then followed by a pooled mean group (PMG) analysis to analyse the long-run relationship between private investment and remittances while controlling for several other variables, such as real-interest rate, economic growth, and the interaction between remittances inflow and business freedom. We use the error correction mechanism (ECM) to find the short-run relationship among variables. Our findings reveal that private investment is positively affected by remittances inflow. Moreover, remittances flow with low business freedom opposes the positive association in the case of these sampled countries. We recommend channelising remittances and lower barriers to business freedom, which may pave the way for a conducive investment-friendly environment.

Suggested Citation

  • Zeeshan Khan & Fazli Rabbi & Manzoor Ahmad & Yang Siqun, 2019. "Remittances inflow and private investment: a case study of South Asian economies via panel data analysis," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 32(1), pages 2723-2742, January.
    • Handle: RePEc:taf:reroxx:v:32:y:2019:i:1:p:2723-2742
    DOI: 10.1080/1331677X.2019.1655464
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    Cited by:

    1. Abdoul Hadirou Yoda & Achille Augustin Diendere, 2024. "Empirical evidence on the relationship between migrants' remittances and private investment in Burkina Faso: A dynamic simultaneous equation model," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(2), pages 1468-1488, March.
    2. Van Bon Nguyen, 2023. "The remittance inflows - private investment nexus in Asian developing countries: does institutional quality matter?," Economic Research Guardian, Weissberg Publishing, vol. 13(1), pages 31-46, June.
    3. Lu, Huaixin & Liao, Xinlin & Wu, Youqun, 2024. "From resource curse to green renaissance: Analyzing the dynamics of natural resource abundance on China's green total factor productivity during business cycles," Resources Policy, Elsevier, vol. 89(C).

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