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Is the Democratisation Process Responsive to Remittance Flows? Evidence from Bangladesh

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Abstract

This paper examines how remittances relate to democratisation process in Bangladesh. Using Structural VAR (SVAR) methods, we are able to compensate for the endogeneity issue. While remittances respond to innovations in the macro-political variables, remittances also have important impact on these variables. Our results build a synergy between two opposing findings in the political science literature which find on one hand that remittances stabilise autocracies and also, on the other hand that it fosters the prospect of democratisation. We show that a shock in remittances will have a negative but transitory effect on democracy. Initially there will be a bout of autocratic episodes which will be eventually eliminated and democracy restored to its original level in three to five years. Using an alternative measure of democracy we also show that for a shock in remittances, a small permanent positive effect on democracy is observed after the fifth year which does not revert to zero at end of the ten period horizon.

Suggested Citation

  • Gazi M. Hassan & Shafiqur Rahman, 2015. "Is the Democratisation Process Responsive to Remittance Flows? Evidence from Bangladesh," Working Papers in Economics 15/06, University of Waikato.
  • Handle: RePEc:wai:econwp:15/06
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    Keywords

    remittances; democratisation; structural VAR (SVAR);

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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