A Study on Determinants of workers’ Remittance Inflow in Bangladesh

Abstract

Remittance inflows of workers to their country of birth is one of the most influential factors contributing to the economic growth of developing countries. Remittance has a significant impact on the economic growth of Bangladesh. In also a vital source of foreign exchange earnings for Bangladesh. This study aims to identify the determinants of worker’s remittance in Bangladesh using time series data from 1976 to 2018. The Augmented Dickey-Fuller Test checks the stationarity of data. After conducting the Engle –Granger two-test and bound test, cointegration is found. The Autoregressive -Distributed lag (ARDL)- Error Correction Model (ECM) approach is used to determine the short-run and long-run relationship between workers’ remittance inflow and macroeconomic determinants of remittance inflow in Bangladesh. In the long run , the number of migrants, the host country’s GDP. Consumer price Index (CPL) of the home country, Per capita GDP of the workers’ remittance inflow in Bangladesh. There is a positive relationship between the current years’ remittance and previous years’ remittance in the short run. A negative short-term relationship was found between remittance and host countries’ GDP. Per capita GDP and CPI of Bangladesh also have an inverse relationship with remittance inflow in the short term. Granger Causality test shows no endogeneity problem in the model. The short-run negative association between Remittance inflow and GDP indicates that a substantial portion of remittances is used for non-productive purposes like consumption. Bangladesh Government can attract the migrants to invest in the productive sectors by reducing bureaucratic complexity and providing a stable and investment-friendly environment .