Macroeconomic Relationship Of Remittance Inflow And Outflow In Nepal: Empirical Evidence Using Ardl And Xg Boost

Remittance has become one of the main sources of foreign income and an important part of the Nepalese economy. It plays a significant role in reducing poverty, increasing household income, and maintaining foreign exchange reserves. The study entitled “MACROECONOMIC RELATIONSHIP OF REMITTANCE INFLOW AND OUTFLOW IN NEPAL EMPIRICAL EVIDENCE USING ARDL AND XG BOOST” has been carried out to examine the relationship of selected macroeconomic variables with remittance inflow and outflow. The main objective of this study is to examine the relationship of macroeconomic indicators real GDP, consumption, investment, and inflation on remittance inflow and outflow while specific objectives include to analyze the trend and pattern of remittance inflow and outflow, and to identify the relationship between remittance and major events. This study is based on secondary data covering the period from 1993 to 2023. Data have been collected from various authentic sources such as Nepal Rastra Bank, National Statistics Office, and World Bank database. The study has employed both descriptive, econometric and machine learning method. The Autoregressive Distributed Lag (ARDL) model has been used to estimate relationship between remittance and economic variables. While, a XG BOOST machine learning model has been applied and run to test variable importance. The findings show that remittance inflow has a positive and significant relation on household consumption and Real GDP. Remittance outflow, though relatively smaller, has increased gradually in past few years and shows an association with the inflation rate. The overall result indicates that remittance inflow supports economic growth. While, remittance outflow has a mild effect on the economy of the country. Overall, the results of ARDL and XG BOOST find similar result. For remittance inflow both models show the importance of consumption, where for remittance outflow both models show the importance of inflation rate.