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Is There a Link between Remittances, Capital Formation, Structural Transformation and Economic Growth? A Dynamic Panel Analysis for Latin America under the PVAR Approach

Author

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  • Eduardo Germán Zurita Moreano

    (Department of Economics, Faculty of Political and Administrative Sciences, Universidad Nacional de Chimborazo, Riobamba 060110, Ecuador)

  • María Gabriela González Bautista

    (Department of Economics, Faculty of Political and Administrative Sciences, Universidad Nacional de Chimborazo, Riobamba 060110, Ecuador)

  • Juan Pablo Vallejo Mata

    (Department of Economics, Faculty of Political and Administrative Sciences, Universidad Nacional de Chimborazo, Riobamba 060110, Ecuador)

  • Víctor Dante Ayaviri-Nina

    (Department of Economics, Faculty of Political and Administrative Sciences, Universidad Nacional de Chimborazo, Riobamba 060110, Ecuador)

Abstract

The literature has mainly focused on analyzing the relationship of remittances with economic growth and social welfare, neglecting more complex aspects where remittances can have relevant implications. To contribute to the literature, the objective of this research is to examine the dynamic relationship between remittances, capital formation, structural transformation and economic growth in 15 Latin American countries during the period 1996–2019. To meet the objective, a panel vector autoregressive regression (PVAR) model was estimated, focusing on the analysis of the impulse-response function and variance decomposition. The results show a positive effect of remittances on economic growth and capital formation and a negative effect of remittances on structural transformation for initial periods and positive for later periods, framing a non-linear relationship. In addition, it was determined that structural transformation does not have a significant impact on economic growth. Finally, it was found that capital formation has a partial positive effect on economic growth. It is concluded that public policies should generate support mechanisms for the efficient channeling of these resources so that they become engines of growth.

Suggested Citation

  • Eduardo Germán Zurita Moreano & María Gabriela González Bautista & Juan Pablo Vallejo Mata & Víctor Dante Ayaviri-Nina, 2024. "Is There a Link between Remittances, Capital Formation, Structural Transformation and Economic Growth? A Dynamic Panel Analysis for Latin America under the PVAR Approach," Economies, MDPI, vol. 12(5), pages 1-25, May.
    • Handle: RePEc:gam:jecomi:v:12:y:2024:i:5:p:109-:d:1389280
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    References listed on IDEAS

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