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Foreign Remittances and Economic Growth in Pakistan: An empirical investigation

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  • Ahmad, Najid
  • Ahmad, Arslan
  • Hayat, Muhammad Farhat

Abstract

This paper investigates the impact of foreign remittances on economic growth of Pakistan. We use secondary time series data for the period of 1978 to 2011. The multiple regression analysis is used to identify the relationship among the variables. GDP is taken as dependent variable while foreign remittances, FDI, inflation and exchange rate as independent variables. Augmented Dickey Fuller (ADF) test is used to check the stationary of variables and all variables found stationary at level. Ordinary Least Squares technique is applied to check the relation among these variables. Results indicate that foreign remittances have positive and significant relation with GDP of Pakistan while inflation and exchange rate has negative effect on economic growth. Foreign direct investment has positive but insignificant relation with GDP of Pakistan. One percent increase in foreign remittances will raise GDP by 0.25 percent. Our model is free from hetroskedasticity and autocorrelation with satisfactory functional form that suggests the stability of our model. The CUSUM and CUSUMSQ are showing that our model is structurally stable within the 5% of critical bounds. Pakistan needs stable and visionary government to enhance foreign capital inflow to boost investment and economic growth

Suggested Citation

  • Ahmad, Najid & Ahmad, Arslan & Hayat, Muhammad Farhat, 2013. "Foreign Remittances and Economic Growth in Pakistan: An empirical investigation," MPRA Paper 49132, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:49132
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    File URL: https://mpra.ub.uni-muenchen.de/49132/1/MPRA_paper_49132.pdf
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    References listed on IDEAS

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    1. Abdul Khaliq & Ilan Noy, 2007. "Foreign Direct Investment and Economic Growth: Empirical Evidence from Sectoral Data in Indonesia," Working Papers 200726, University of Hawaii at Manoa, Department of Economics.
    2. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
    3. Huybens, Elisabeth & Smith, Bruce D., 1999. "Inflation, financial markets and long-run real activity," Journal of Monetary Economics, Elsevier, vol. 43(2), pages 283-315, April.
    4. Bruno, Michael & Easterly, William, 1998. "Inflation crises and long-run growth," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 3-26, February.
    5. Jinzhao Chen, 2015. "Interprovincial Competitiveness and Economic Growth: Evidence from Chinese Provincial Data (1992–2008)," Pacific Economic Review, Wiley Blackwell, vol. 20(3), pages 388-414, August.
    6. Qayyum, Abdul & Javid, Muhammad & Arif, Umaima, 2008. "Impact of Remittances on Economic Growth and Poverty: Evidence from Pakistan," MPRA Paper 22941, University Library of Munich, Germany.
    7. Jawaid, Syed Tehseen & Raza, Syed Ali, 2012. "Remittances, Growth and Convergence: Evidence from Developed and Developing Countries," MPRA Paper 39002, University Library of Munich, Germany.
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    Cited by:

    1. repec:gei:jnlfer:v:2:y:2017:i:1:p:40-55 is not listed on IDEAS
    2. Ali, Sharafat, 2014. "Inflation, Income Inequality and Economic Growth in Pakistan: A Cointegration Analysis," MPRA Paper 53706, University Library of Munich, Germany.

    More about this item

    Keywords

    Foreign remittances; Economic Growth; OLS; Pakistan;

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General

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