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Does remittance drive economic growth in emerging economies: Evidence from FMOLS and Panel VECM

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  • Kalandi Charan PRADHAN

    (Indian Institute of Technology Bombay, India)

Abstract

The study investigates the dynamic relationship among remittances, export, exchange rate and economic growth in emerging (Brazil, Russian Federation, India, China and South Africa) economies using balanced panel data ranging from 1994-2013. Data for all variables have been extracted from World Bank Indicators in terms of US$. The Multivariate Panel Cointegration technique results demonstrate the existence of long run equilibrium relationships among observed variables. Employing the Fully Modified OLS Model (FMOLS), the study finds that remittances have significant negative impact on economic growth in Brazil, Russian Federation and India. However, remittances have significantly positive impact on economic growth in China. As a group FMOLS extends negative impact of remittances on economic growth across the selected emerging economies. Panel Vector Error Correction Model (PVCEM) has been adopted to show the long run and short run causality among the variables across the countries. The PVECM result reveals that there is a long-run causal relationship running from export and remittances to economic growth.

Suggested Citation

  • Kalandi Charan PRADHAN, 2016. "Does remittance drive economic growth in emerging economies: Evidence from FMOLS and Panel VECM," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(4(609), W), pages 57-74, Winter.
    • Handle: RePEc:agr:journl:v:xxiii:y:2016:i:4(609):p:57-74
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    4. Gibogwe, Vincent & Nigo, Ayine R.S. & Kufuor, Karen, 2022. "Institutional Quality and Economic Growth in Tanzania," MPRA Paper 115486, University Library of Munich, Germany, revised 28 Nov 2022.
    5. Saudi Arabian Monetary Authority, 2018. "Macroeconomic and distributional effects of globalisation," BIS Papers chapters, in: Bank for International Settlements (ed.), Globalisation and deglobalisation, volume 100, pages 311-319, Bank for International Settlements.
    6. Constantin ANGHELACHE & Georgiana NITA & Alexandru BADIU, 2017. "Migration And Remittances – Statistical And Econometric Models Used To Analyze The Impact Of Remittances In Economic Development," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 65(6), pages 134-143, June.
    7. Gibogwe, Vincent & Nigo, Ayine R.S. & Kufuor, Karen, 2022. "Foreign direct investment and economic growth in Tanzania," MPRA Paper 115028, University Library of Munich, Germany, revised 20 Oct 2022.
    8. Jamiu Adetola Odugbesan & Tomiwa Adebayo Sunday & Gbolahan Olowu, 2021. "Asymmetric effect of financial development and remittance on economic growth in MINT economies: an application of panel NARDL," Future Business Journal, Springer, vol. 7(1), pages 1-9, December.
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