Remittances and Real Investment in Jordan: Is There a Link? An Empirical Investigation

Ghazi Al-Assaf and Alaaeddin Al-Tarawneh

Applied Economics Quarterly (formerly: Konjunkturpolitik), 2016, vol. 62, issue 1, 69-84

Abstract: The study attempts to test the long-run equilibrium relationships between the flows of workers’ remittances, andreal investment.Using Jordanian data, over the period 1976 to 2012, the empirical results provide strong evidence on the presence of a long-run stable investment function. In the short-run, remittances has a positive and significant effect on the real investment; a consistent result with the literature. Therefore, the results confirm the significant impact of worker’s remittances on the real investment found in the previous literature using a cointegration technique. Both Engle-Granger and Johansen cointegration tests show that real investment and remittances are cointegrated and there is clear evidence on the presence of a long-run relationship among them in Jordan. This is based on the statistical significance of the coefficient of the error correction term. The estimated coefficient is -0.545 and statistically significant with the anticipated negative sign, which indicates that the speed of adjustment to equilibrium in the long-run is relatively high. This finding emphasises the importance of the flows of remittances to labour-exporting countrieson the real investment especially in the case of Jordan.

Keywords: Workers’ Remittances; Real Investment; Cointegration; Jordan (search for similar items in EconPapers)
Date: 2016
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