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Causality between Foreign Remittance and Economic Growth: Empirical Evidence from Croatia

Craig Depken, Maja Nikšić Radić and Hana Paleka
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Maja Nikšić Radić: Faculty of Tourism and Hospitality Management, University of Rijeka, 51000 Rijeka, Croatia
Hana Paleka: Faculty of Tourism and Hospitality Management, University of Rijeka, 51000 Rijeka, Croatia

Sustainability, 2021, vol. 13, issue 21, 1-0

Abstract: While human capital and foreign capital have received considerable attention in the study of economic growth, foreign remittances are less of a focus. Though some studies have identified the increasing importance of remittances, they have failed to analyze the relationship between foreign remittances and economic growth. The aim of this paper is to investigate the causal link between foreign remittances and economic growth in the Republic of Croatia over the period from 2000q1 to 2020q2. Any causal link is identified using Granger causality tests in vector autoregression models. In addition, variance decomposition and impulse response functions help determine any dynamic links. The empirical results suggest that, in the case of Croatia, there is a unidirectional causal relationship from foreign remittances to economic growth but no link in the opposite direction. The research results indicate that foreign remittances play a role in the Croatian economy and are one of the consequences of the large emigration processes that affected Croatia after joining the European Union.

Keywords: economic growth; foreign remittance; Granger causality; impulse response function; variance decomposition (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
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