Do remittances impact the economy? Some empirical evidences from a developing economy
The study attempts to examine the impact of remittances on macroeconomic activities (private consumption and investment) and its implications on economic growth in India for the period from 1966-67 to 2003-04. Estimating a general consumption model, the results indicate that remittances along with debt, money supply (net of bank demand deposits) and income, consistently have a positive influence on private consumption. This suggests that as usually the case for a developing economy, the effect of remittances is not different from that of income indicating income effect of remittances. The result also implies that government debt is perceived as net wealth by the private sector. With the increase in public debt, private sector perceives that their wealth is also getting increased and as a result they tend to spend more on consumption ignoring its implications in terms of future tax burden that they have to incur. Further, examining the impact of remittances on private investment and output growth, the study finds that although remittances do adversely affect private investment but the growth rate of remittances do not influence on the growth rate of output in the economy. This is something quite puzzling. However, on the basis of no growth effect of remittances, the study suggests that the government policy should be designed towards inducing the private sector to allocate more for productive investments for leveling up the rate of growth. Otherwise significant a proportion of remittances would result in increases in private consumption without any contributory impact on the economy.
|Date of creation:||Oct 2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +91 471 2448 881
Fax: +91 471 2447 137
Web page: http://www.cds.edu
More information through EDIRC
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.:
- Martin Feldstein, 1980.
"Government Deficits and Aggregate Demand,"
NBER Working Papers
0435, National Bureau of Economic Research, Inc.
- Cebula, Richard J, 1985. "Crowding Out and Fiscal Policy in the United States: A Note on the Recent Experience," Public Finance = Finances publiques, , vol. 40(1), pages 133-36.
- Ralph Chami & Connel Fullenkamp & Samir Jahjah, 2005.
"Are Immigrant Remittance Flows a Source of Capital for Development?,"
IMF Staff Papers,
Palgrave Macmillan, vol. 52(1), pages 55-81, April.
- Samir Jahjah & Ralph Chami & Connel Fullenkamp, 2003. "Are Immigrant Remittance Flows a Source of Capital for Development," IMF Working Papers 03/189, International Monetary Fund.
- Rapoport, Hillel & Docquier, Frederic, 2006.
"The Economics of Migrants' Remittances,"
Handbook on the Economics of Giving, Reciprocity and Altruism,
- Aschauer, David Alan, 1985. "Fiscal Policy and Aggregate Demand," American Economic Review, American Economic Association, vol. 75(1), pages 117-27, March.
- Lucas, Robert E B & Stark, Oded, 1985. "Motivations to Remit: Evidence from Botswana," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 901-18, October.
- 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.
- Abhijit V. Banerjee & Andrew F. Newman, 1990.
"Occupational Choice and the Process of Development,"
911, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-98, April.
- Mihir A. Desai & Devesh Kapur & John McHale, 2004. "Sharing the Spoils: Taxing International Human Capital Flows," International Tax and Public Finance, Springer, vol. 11(5), pages 663-693, 09.
- Kormendi, Roger C, 1983. "Government Debt, Government Spending, and Private Sector Behavior," American Economic Review, American Economic Association, vol. 73(5), pages 994-1010, December.
- 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.
- Alexei Kireyev, 2006. "The Macroeconomics of Remittances; The Case of Tajikistan," IMF Working Papers 06/2, International Monetary Fund.
- Djajic, Slobodan, 1986. "International migration, remittances and welfare in a dependent economy," Journal of Development Economics, Elsevier, vol. 21(2), pages 229-234, May.
- John Connell, 2000. "Migration and remittances in island microstates: a comparative perspective on the South Pacific and the Caribbean," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 24(1), pages 52-78, 03.
- Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-87, December.
When requesting a correction, please mention this item's handle: RePEc:ind:cdswpp: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: (Shamprasad M. Pujar)
If references are entirely missing, you can add them using this form.