How economic hardship and financial deepening affect the inflow of remittances to Pakistan: Empirical findings based on a bounds test model
2011
Khalid, S. (University of Malakand, Dir (Pakistan). Dept. of Economics) | Rabbi, F. (University of Malakand, Dir (Pakistan). Dept. of Economics) | Waliullah (University of Malakand, Dir (Pakistan). Dept. of Economics)
In the discourse on remittances, it is generally argued that altruism as well as an efficient financial system would increase the flow of remittances to the recipient country. We empirically examine whether altruism is the force behind the transfer of remittances to Pakistan and does financial deepening affect the inflow of remittances. Furthermore, we analyze whether remittances are procyclical, countercyclical or acyclical. An annual data set spanning 1973-2008 is used to analyze the relationship between remittances, financial deepening and Gross Domestic Product (GDP) growth rate by using Bounds Test (Modified ARDL). Our findings negate the general notion that altruism is a driving force behind remittances. The analysis further indicates that remittances tend to increase as financial system gets deeper. Moreover, it is confirmed that remittances are procyclical and may be of little relief in events of downturns in the economy.
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