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Do remittances and foreign aid augment the gross savings: Bangladesh, India and Philippines perspective?

Shirin Akter ()
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Shirin Akter: Niigata University

International Review of Economics, 2018, vol. 65, issue 4, No 3, 449-463

Abstract: Abstract Savings is considered to be a principal determinant to achieve long-run economic growth. Remittances and foreign aid are two important foreign capital inflows to meet the savings deficiency of developing nations. The objective of this study is to investigate the long-run impact of remittance to stimulate savings in remittance recipient countries. This paper contributes to the macroeconomic impact of remittance through a comparative study on Bangladesh, India and Philippines that positioned among the top ten largest remittance recipient countries from 2008 and onwards. The analysis makes use of an annual time series data over the period of 1980–2015. The Johansen cointegration test suggested long-run cointegrating relationship of remittance and foreign aid on gross savings. The test result suggests positive effect of remittances on gross savings for Bangladesh and Philippines although an insignificant negative effect for India. However, foreign aid has significant negative long-run impact in all the three cases. Government policy should focus on leveraging remittance flows to facilitate savings and investment for capital accumulation.

Keywords: Remittance; Foreign aid; Gross savings; Bangladesh; India; Philippines (search for similar items in EconPapers)
JEL-codes: F22 F24 F35 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/s12232-018-0305-z

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