| Title : | Impact of workers’ remittance on financial development of Nepal | | Material Type: | printed text | | Authors: | Birendra Bahadur Bista, Author | | Publication Date: | 2017 | | Pagination: | 100p. | | Size: | GRP/Thesis | | Accompanying material: | 10/B | | Languages : | English | | Descriptors: | Emigrant remittances
| | Class number: | 332.0424 | | Abstract: | Remittance inflow has been an important part of sources of funds in developing countries like Nepal and with the large labour migration the dependency on the remittance inflow has become broader than ever. Remittance remain a key source of external resource flows for developing countries, far exceeding official development assistance and more stable than private debt and portfolio equity flows (Ratha et al., 2011). Inflow of remittance, being a prime source of foreign currency and thereby a contribution to the national economy plays a significant role in the context of developing nations. The importance of the relationship between macroeconomic variables and financial development has been well organized and emphasized in the field of research. Thus the studies of this nature are very important for policy makers in in deciding which sector to put emphasis on. Once it is determined that is casualty from macroeconomic variables to financial development. There should be urgency in making relevant policy recommendations, to facilitate and foster sound growth of the Nepalese financial sector.
This study investigates the relationship between macroeconomic variables and financial development. More specifically, this study has been conducted to test the long run cointegrating relationship between macroeconomic variables and financial development along with analysis of direction of casualty between macroeconomic variables and financial development in both long term and short run in case of Nepal for the period of 1990 to 2015. Remittance inflow to GDP, foreign direct investment to GDP, inflation rate, per capita income and exchange rate are used as macroeconomic variables. Financial development is measured in terms of money supply and total bank deposit.
For integration and cointegration technique, this study employed Augmented Dickey Fuller (ADF) unit root and ARDL approach to cointegration by Pesaran et al. (1997) in order to test the of stationarity and the long run relationship, respectively. The ARDL approach has been, further, used to analyze the long run dynamics of the macroeconomic variables and financial development relationship. The error correction model has been developed from ARDL approach to analyze the short run relationship between macroeconomic variables and financial development. The same model has also been used to analyze the direction of causality in short run. The regression diagnostic tests have also been performed to check the validity of proposed model. The Jarque – Bera (JB) test, Ramsey test, and Lagrange Multiplier (LM) tests are used to test the normality, functional form and serial correlation respectively.
The ARDL bound testing approach to cointegration by Pesaran et al (1997) estimates show that there is fairly a long run cointegrating relationship between financial development and macroeconomic variables. Therefore, it is clear indication that long run causality is one way from remittance inflow to financial development. The long run estimates of the estimated (p, q, r, s, m, n) models indicate that remittance, exchange rate and per capita income are the major indicator of the financial development and has statistically significant impact on economic growth in long run. Similarly, remittance inflow, inflation rate, per capita income and exchange rate found to be positively correlated with financial development. The diagnostic statistics (normality, autocorrelation, and functional form misspecification) show that the used ARDL model seems to be data congruent and free from specification error. Thus, the strong link between macroeconomic variables and financial development does not appear to be spurious one. The estimates of short run ARDL error correction model depicted that error correction term (ECM) lagged one period is negative and highly significant in all estimated models indicating macroeconomic and financial development variables are cointegrated. Reasonably, large coefficients of ECM term indicate that speed of adjustment to the equilibrium after a shock of previous period is very high. The short run estimates of the model shows that remittance inflow, inflation rate, per capita income and exchange rate have significant positive impact on financial development. The short run coefficient for foreign direct investment shows negative and significant relationship with economic growth. This finding suggests that even if high level of remittance is positively related to total deposit in long term and short term but it will have no impact on money supply in long run.
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Impact of workers’ remittance on financial development of Nepal [printed text] / Birendra Bahadur Bista, Author . - 2017 . - 100p. ; GRP/Thesis + 10/B. Languages : English | Descriptors: | Emigrant remittances
| | Class number: | 332.0424 | | Abstract: | Remittance inflow has been an important part of sources of funds in developing countries like Nepal and with the large labour migration the dependency on the remittance inflow has become broader than ever. Remittance remain a key source of external resource flows for developing countries, far exceeding official development assistance and more stable than private debt and portfolio equity flows (Ratha et al., 2011). Inflow of remittance, being a prime source of foreign currency and thereby a contribution to the national economy plays a significant role in the context of developing nations. The importance of the relationship between macroeconomic variables and financial development has been well organized and emphasized in the field of research. Thus the studies of this nature are very important for policy makers in in deciding which sector to put emphasis on. Once it is determined that is casualty from macroeconomic variables to financial development. There should be urgency in making relevant policy recommendations, to facilitate and foster sound growth of the Nepalese financial sector.
This study investigates the relationship between macroeconomic variables and financial development. More specifically, this study has been conducted to test the long run cointegrating relationship between macroeconomic variables and financial development along with analysis of direction of casualty between macroeconomic variables and financial development in both long term and short run in case of Nepal for the period of 1990 to 2015. Remittance inflow to GDP, foreign direct investment to GDP, inflation rate, per capita income and exchange rate are used as macroeconomic variables. Financial development is measured in terms of money supply and total bank deposit.
For integration and cointegration technique, this study employed Augmented Dickey Fuller (ADF) unit root and ARDL approach to cointegration by Pesaran et al. (1997) in order to test the of stationarity and the long run relationship, respectively. The ARDL approach has been, further, used to analyze the long run dynamics of the macroeconomic variables and financial development relationship. The error correction model has been developed from ARDL approach to analyze the short run relationship between macroeconomic variables and financial development. The same model has also been used to analyze the direction of causality in short run. The regression diagnostic tests have also been performed to check the validity of proposed model. The Jarque – Bera (JB) test, Ramsey test, and Lagrange Multiplier (LM) tests are used to test the normality, functional form and serial correlation respectively.
The ARDL bound testing approach to cointegration by Pesaran et al (1997) estimates show that there is fairly a long run cointegrating relationship between financial development and macroeconomic variables. Therefore, it is clear indication that long run causality is one way from remittance inflow to financial development. The long run estimates of the estimated (p, q, r, s, m, n) models indicate that remittance, exchange rate and per capita income are the major indicator of the financial development and has statistically significant impact on economic growth in long run. Similarly, remittance inflow, inflation rate, per capita income and exchange rate found to be positively correlated with financial development. The diagnostic statistics (normality, autocorrelation, and functional form misspecification) show that the used ARDL model seems to be data congruent and free from specification error. Thus, the strong link between macroeconomic variables and financial development does not appear to be spurious one. The estimates of short run ARDL error correction model depicted that error correction term (ECM) lagged one period is negative and highly significant in all estimated models indicating macroeconomic and financial development variables are cointegrated. Reasonably, large coefficients of ECM term indicate that speed of adjustment to the equilibrium after a shock of previous period is very high. The short run estimates of the model shows that remittance inflow, inflation rate, per capita income and exchange rate have significant positive impact on financial development. The short run coefficient for foreign direct investment shows negative and significant relationship with economic growth. This finding suggests that even if high level of remittance is positively related to total deposit in long term and short term but it will have no impact on money supply in long run.
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