Are remittances and imports substitute or complement in developing country? A disaggregated evidence

Syed Tehseen Jawaid, Lubna Khan and Imtiaz Arif

Journal of Chinese Economic and Foreign Trade Studies, 2022, vol. 15, issue 1, 106-123

Abstract: Purpose - Despite the reasonable surge of remittances and imports in Pakistan, very less attention has been given to this area. To bridge the gap, this study aims to explore the relationship of worker’s remittances and imports of Pakistan at both aggregate and disaggregate levels. Also, this research focuses on investigating whether remitted income substitute or complement imports of the country. Design/methodology/approach - To achieve these goals, the authors use annual time-series data from 1974–2016. Findings - Empirical findings obtained from the autoregressive distributed lag model method suggest that remittances substitute imports in Pakistan. It is also found that remittances not only substitute aggregate imports but also act as a substitute at different disaggregated levels. Further, it is documented that higher economic growth increases imports, whereas the real exchange rate for imports is inversely related to imports at both levels. Originality/value - These empirical findings also draw some substantive policy implications for the state owners and policy advisers.

Keywords: ARDL; Remittances; Real exchange rate; Gross domestic product; Aggregate and disaggregate imports; Pakistan; Consumer goods; Capital goods; Intermediate goods; F240; F18; C4 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jcefts:jcefts-07-2021-0038

DOI: 10.1108/JCEFTS-07-2021-0038

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