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Foreign Remittances and Economic Growth in Pakistan: An empirical investigation

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

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

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 49132.

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Date of creation: Jul 2013
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Handle: RePEc:pra:mprapa:49132
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  1. Robert J. Barro, 1995. "Inflation and Economic Growth," NBER Working Papers 5326, National Bureau of Economic Research, Inc.
  2. Michael Bruno & William Easterly, 1995. "Inflation Crises and Long-Run Growth," NBER Working Papers 5209, National Bureau of Economic Research, Inc.
  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. 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.
  5. Jinzhao Chen, 2012. "Real Exchange Rate and Economic Growth: Evidence from Chinese Provincial Data (1992 - 2008)," PSE Working Papers halshs-00667467, HAL.
  6. 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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