Impacts of Remittance and FDI on Economic Growth in South Asian Countries: A Panel Data Analysis

Md. Golam Mostafa and Md. Abdul Wadud
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Md. Golam Mostafa: Associate Professor (Economics), Officer on Special Duty, Directorate of Secondary and Higher Education, Dhaka, Bangladesh
Md. Abdul Wadud: Professor, Department of Economics, University of Rajshahi, Rajshahi -6205, Bangladesh.

International Journal of Science and Business, 2024, vol. 40, issue 1, 92-106

Abstract: The current study looks at the short- and long-term effects of foreign direct investment (FDI) and remittances on gross domestic product (GDP) in South Asian nations, particularly Bangladesh, India, Sri Lanka, and Pakistan. Utilizing annual panel data from several secondary sources spanning the period from 1981 to 2023, the research applies multiple econometric techniques, including LLC and IPS tests, Johansen Fisher type cointegration test, and panel Vector Error Correction Model (VECM), along with several diagnostic tests to ensure model reliability. The findings reveal a substantial long-term relation between the variables. Remittances and total reserves have a notable optimistic impact on GDP in both the long and short term, while FDI negatively impacts GDP. To enhance remittance flow and promote sustainable economic growth, the study suggests exporting a skilled labor force abroad. Consequently, the study recommends that South Asian countries develop policies, programs, and institutional reforms to encourage the productive use of remittances.

Keywords: Economic growth; Foreign direct investment; Remittance VECM; LLC; IPS (search for similar items in EconPapers)
Date: 2024
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