The inter-temporal relationship between workers' remittances and consumption expenditure in Sri Lanka

Ahamed Lebbe Mohamed Aslam and Selliah Sivarajasingham

Journal of Economic and Administrative Sciences, 2020, vol. 37, issue 2, 163-178

Abstract: Purpose - The objective of this study is to examine the inter-temporal relationship between workers' remittances and consumption expenditure in Sri Lanka over the period of 1975–2017 using the annual time series data. Design/methodology/approach - To test the order of integration of the variables used in this study, the augmented Dickey–Fuller (ADF) and Phillips and Perron (PP) unit root tests were employed. The autoregressive distributed lag (ARDL) bounds cointegration technique was used to examine the long-run relationship between the variables. The Granger causality test was used to examine the causal relationship between the variables. Findings - The unit root tests confirm that the variables are stationary at 1st differenceI(1). Meanwhile, the ARDL test results show that workers' remittances have a positive long-run relationship with consumption expenditure in Sri Lanka. The coefficient of the error correction term indicates that 9.3% of disequilibrium error is adjusted each year and the response variable of the consumption expenditure moves towards the long-run equilibrium path. Further, the results of the Granger causality test indicate that workers' remittances Granger cause consumption expenditure in the short-run. Practical implications - The findings have some important policy implications for the design of efficient policy related to workers' remittances and consumption expenditure pattern, the knowledge of which will help promote the macroeconomic stability and welfare of people in Sri Lanka. Originality/value - This study contributes to the existing literature by using newly developed ARDL bounds cointegration techniques to investigate the inter-temporal relationship between workers' remittances and consumption expenditure in Sri Lanka. Furthermore, to our knowledge, this study is the first research in examining the inter-temporal relationship between workers' remittances and consumption expenditure in Sri Lanka.

Keywords: ARDL bounds test; Consumption expenditure; Granger causality; Workers' remittances; Sri Lanka (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:jeaspp:jeas-03-2020-0030

DOI: 10.1108/JEAS-03-2020-0030

Access Statistics for this article

Journal of Economic and Administrative Sciences is currently edited by Associate Professor Ghulam A Arain and Dr Rebecca Abraham

More articles in Journal of Economic and Administrative Sciences from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().