Remittances and the Growth Nexus in Bangladesh: A VECM Based Study

Asma Ul Hosna Mim and Sufian Ahammed

No w56ck_v1, SocArXiv from Center for Open Science

Abstract: Bangladesh is one of the world’s top remittance receiving nations. However, the macroeconomic channels through which remittance inflows affect long run economic growth have not been sufficiently explored. This study investigates the influence of remittances on the economic growth of Bangladesh from 1976 to 2021. We introduced foreign direct investment (FDI), official development assistance (ODA), exports and imports as control variables in our model. Annual data on each variable were collected from the World Development Indicators (WDI). The Augmented Dickey Fuller (ADF) test results identified that all variables are integrated of order one. Following that Johansen cointegration test confirmed a stable long run equilibrium relationship among the variables. Then, we employed Vector Error Correction Model (VECM) to estimate both short run and long run dynamics. The findings indicate the existence of a long run relationship among all the chosen variables. Specifically, remittances exert a positive significant effect on the growth of the Bangladesh economy. The error correction term (ECT) indicates that the system will eventually reach a long term equilibrium with a 26% annual adjustment rate in response to any short run disturbances. The Granger Causality test reveals unidirectional causality from remittance to economic growth. Overall, the findings suggest that remittances play a crucial role in promoting sustainable economic growth in Bangladesh, even after controlling for other external capital flows. Therefore, policymakers should strengthen formal remittance channels and encourage the proper utilization of remittance inflows.

Date: 2026-11-07
References: Add references at CitEc
Citations:

Downloads: (external link)
https://osf.io/download/6aeee9b8fb850ad397ca3450/

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:osf:socarx:w56ck_v1

DOI: 10.31235/osf.io/w56ck_v1

Access Statistics for this paper

More papers in SocArXiv from Center for Open Science
Bibliographic data for series maintained by OSF ().