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Growth Effects of Remittances:Is there a U-Shaped Relationship?

This paper shows that the effect of remittances on economic growth entails a U-shaped pattern where it is negative in the beginning but becomes positive later on. The analysis is based on the argument that recipient household savings out of remittances income is negligible or even negative in the initial periods but turns positive in the later part. Using time series data from Bangladesh and single-equation cointegration methods, we find that remittances’ effect on long-run growth is negative and falling until remittances-to-GDP ratio is roughly 9 percent and it starts to become positive when the ratio exceeds 17 percent.

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File URL: ftp://mngt.waikato.ac.nz/RePEc/wai/econwp/1316.pdf
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Paper provided by University of Waikato, Department of Economics in its series Working Papers in Economics with number 13/16.

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Length: 22 pages
Date of creation: 15 Nov 2013
Date of revision:
Handle: RePEc:wai:econwp:13/16
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  1. Dean Yang, 2006. "International Migration, Remittances, and Household Investment: Evidence from Philippine Migrants' Exchange Rate Shocks," NBER Working Papers 12325, National Bureau of Economic Research, Inc.
  2. Abu Siddique & E. A. Selvanathan & Saroja Selvanathan, 2011. "Remittances and Economic Growth: Empirical Evidence from Bangladesh, India and Sri Lanka," Journal of Development Studies, Taylor & Francis Journals, vol. 48(8), pages 1045-1062, October.
  3. John Page & Sonia Plaza, 2006. "Migration Remittances and Development: A Review of Global Evidence," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 15(2), pages 245-336, December.
  4. Dean Yang & HwaJung Choi, 2005. "Are Remittances Insurance? Evidence from Rainfall Shocks in the Philippines," Working Papers 535, Research Seminar in International Economics, University of Michigan.
  5. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  6. Rao, B. Bhaskara & Hassan, Gazi, 2009. "Are the Direct and Indirect Growth Effects of Remittances Significant?," MPRA Paper 18641, University Library of Munich, Germany.
  7. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-51, March.
  8. Alejandra Cox Edwards & Manuelita Ureta, 2003. "International Migration, Remittances, and Schooling: Evidence from El Salvador," NBER Working Papers 9766, National Bureau of Economic Research, Inc.
  9. Gazi M. Hassan & Mark J. Holmes, 2013. "Remittances and the real effective exchange rate," Applied Economics, Taylor & Francis Journals, vol. 45(35), pages 4959-4970, December.
  10. David Mckenzie & Hillel Rapoport, 2004. "Network Effects and the Dynamics of Migration and Inequality: Theory and Evidence from Mexico," Working Papers 2004-3, Bar-Ilan University, Department of Economics.
  11. Amuedo-Dorantes, Catalina & Pozo, Susan, 2004. "Workers' Remittances and the Real Exchange Rate: A Paradox of Gifts," World Development, Elsevier, vol. 32(8), pages 1407-1417, August.
  12. Giuliano, Paola & Ruiz-Arranz, Marta, 2009. "Remittances, financial development, and growth," Journal of Development Economics, Elsevier, vol. 90(1), pages 144-152, September.
  13. 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.
  14. Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992. "Efficient Tests for an Autoregressive Unit Root," NBER Technical Working Papers 0130, National Bureau of Economic Research, Inc.
  15. Serdar Sayan, 2006. "Business Cycles and Workers' Remittances: How Do Migrant Workers Respond to Cyclical Movements of GDP At Home?," IMF Working Papers 06/52, International Monetary Fund.
  16. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  17. Abdelhak Senhadji, 2000. "Sources of Economic Growth: An Extensive Growth Accounting Exercise," IMF Staff Papers, Palgrave Macmillan, vol. 47(1), pages 6.
  18. Edwards, Alejandra Cox & Ureta, Manuelita, 2003. "International migration, remittances, and schooling: evidence from El Salvador," Journal of Development Economics, Elsevier, vol. 72(2), pages 429-461, December.
  19. Craig Burnside & David Dollar, 2004. "Aid, Policies, and Growth: Reply," American Economic Review, American Economic Association, vol. 94(3), pages 781-784, June.
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