The Impact of International Remittances on Public Debt Sustainability in Kerala: Evidence from the FMOLS Approach

Sabu Anjana () and Mohandas Vineeth ()
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Sabu Anjana: PhD, Head, Department of Economics, Christ University, Bangalore Yeshwanthpur Campus, Near Tumkur Road, Nagasandra, Bangalore, Karnataka, 560073, India
Mohandas Vineeth: PhD, Head, Department of Economics, Christ University, Bangalore Yeshwanthpur Campus, Near Tumkur Road, Nagasandra, Bangalore, Karnataka, 560073, India

Statistics, Politics and Policy, 2025, vol. 16, issue 3, 331-358

Abstract: Remittances from Kerala’s migrant workers and professionals constitute a vital financial inflow, surpassing their relative significance in most other Indian states. With public debt nearing 60 % of NSDP, these transfers offer a potential buffer for debt sustainability. Applying Oates’ theory within Bohn’s debt-sustainability framework using an FMOLS model, and validated through Johansen testing, this study examines the remittance–debt nexus from 1980 to 2023. FMOLS results indicate a deterioration of debt sustainability despite substantial remittance inflows. The findings emphasize the need to reduce market borrowings, enhance the fiscal role of remittances, and promote policies supporting formal transfer channels, source diversification, remittance-linked investment, and financial literacy among migrant households to strengthen Kerala’s long-term fiscal resilience and enable more productive use of remittances.

Keywords: international remittances; migration; debt sustainability; state economy; FMOLS-VECM approach (search for similar items in EconPapers)
JEL-codes: C32 C5 F22 F24 H63 H76 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1515/spp-2025-0004

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