Emigrant’s remittances, Dutch Disease and capital accumulation in Pakistan

Hiroyuki Taguchi () and Bushra Batool

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines macroeconomic impacts of emigrant remittances in Pakistan by using a vector autoregressive estimation framework. The contribution of this study is to investigate the threshold of remittance-GDP ratio that has real effects on the economy in terms of Dutch Disease and capital accumulation. Finding the threshold is significant because Pakistan has been one of the largest recipients of remittances in the world and her remittance inflows have experienced substantial fluctuations. The empirical results showed that: regarding the Dutch Disease effect, an increase in remittance-GDP ratio, if it exceeds the 6% threshold, leads to a decline in manufacturing-services ratio; and as for the capital accumulation effect, an increase in remittance-GDP ratio, when it exceeds the 5% threshold, leads to a decline in investment-consumption ratio. These outcomes suggested that the emigrants’ remittance inflows in Pakistan, if they exceed certain levels relative to GDP, have aggravated industrialization (Dutch Disease effect) and capital accumulation.

Keywords: Pakistan; Emigrant remittances; Dutch Disease; Capital accumulation; Vector auto-regressive estimation (search for similar items in EconPapers)
JEL-codes: F22 F39 O53 (search for similar items in EconPapers)
Date: 2024
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