| Title : | Impact of remittance on economic growth and poverty alleviation in Nepal | | Material Type: | printed text | | Authors: | Yegya Bahadur K.C, Author | | Publication Date: | 2017 | | Pagination: | 90p. | | Size: | GRP/Thesis | | Accompanying material: | 10/B | | Languages : | English | | Descriptors: | Remittance
| | Class number: | 332.042 | | Abstract: | Remittance is a transfer of money by foreign worker to his or her home country. Remittance can also be referred as monetary payment transferred by a customer to a business from one place to another (Mafruhah et al., 2012). In the worldwide economy, remittances represent one of the major international flows of financial resources. Worker remittances constitute an increasingly important mechanism for the transfer of resources from developed to developing countries, and remittances are the second-largest source, behind foreign direct investment, of external funding for developing countries. Sometimes the flows of remittances can exceed the flows of foreign direct investment (Shera & Meyer, 2013).
Inflows of remittances increase the economic growth and reduce the poverty by stimulating the income of the recipient country, reducing credit constraints, accelerating investment and enhancing human development through financing better education and health (Jongwanich (2007); Gupta etal.(2009). However, Chami et al. (2005) found that remittances have negative impacts on economic growth of recipient country because a significant flow of remittances reduce labor force participation and work efforts which lowers output. Thus, the impact of remittances on economic growth and development of recipient country has been controversial.
According to ArefAssaf (2015), there is a positive effect of remittances on GDP. On the other hand the effects of other traditional sources of economic growth, such as gross fixed capital formation showed that there is a positive effect on GDP, a negative effect of foreign direct investment on GDP, while no significant effect of labor force on GDP. Similarly, Faini (2002) argued that remittances overcome capital market imperfections and allow migrant households to accumulate positive assets.
Glytsos (1993) examined the impact of remittances on output using data from 1969 to 1998 for Egypt, Greece, Jordan, Morocco, and Portugal. For Egypt, Jordan, and Morocco the growth-generating capacity of rising remittances characteristic is smaller than the growth-destroying capacity of falling remittances. Therefore, the large fluctuations in the real value of remittances contribute to large fluctuations of output growth and cause instability in the economies concerned. Kaufmann et al. (2004) found a robust positive relationship between growth and gross capital formation, as well as between growth and some of the institutional variables. The study also found some evidence of a positive relationship between growth and total remittances. Similarly, Azam & Khan (2011) found that worker remittance has significant and positive effects on economic growth.
Javidet al. (2012) investigated the importance of remittances inflow and its implication for economic growth and poverty reduction in Pakistan. By using ARDL approach, the study analyzed the impact of remittances inflow on economic growth and poverty in Pakistan for the period 1973-2010. The empirical evidence showed that remittances effect economic growth positively and significantly. Furthermore, the study also found that remittances have a strong and statistically significant impact on poverty reduction. Similarly, Giuliano (2008) found that remittances boost growth in countries with less developed financial system as it provides an alternative way to finance investment and reduce liquidity constraints. Workers’ remittances also play an important role in human capital investment in the recipient country through relaxing resource constraints. Rajan &Subramanian (2005) found a robust and significant positive effect of remittance on long-term growth.
Jongwanich (2007) examined the impact of workers’ remittances on growth and poverty in Asia-Pacific developing countries. The empirical evidence showed that remittances have a significant impact on poverty reduction and trivial impact on growth. Similarly, Burgess and Vikram (2005) examined the different channels through which remittances can affect economic activity. The study does not clearly support the short term stabilizing effect on consumption, however the longer term economic effect of such flows seems to be ambiguous. Catrinescu et al. (2009) explored that remittances exert a weak positive impact on long term macroeconomic growth. Furthermore, the study also supported the idea that development impact of remittance enhances in the presence of sound macroeconomic policies and institution.
The majorobjective of the study is to examine the impact of remittance on economic growth and poverty alleviation in Nepal.The study is based on the secondary data, which were gathered from 1995/96 to 2014/15, leading to a total of 20 observations. The main sources of data are Economic Survey, Monetary Policy and different reports published by NRB, reports published by World Bank, and different issues and reports published by Ministry of Finance.
The correlation analysis shows that gross domestic product is positively correlated to total remittances inflow, broad money supply, foreign aid, industrial production, inflation and foreign direct investment. Similarly, poverty alleviation is positively correlated with total remittance inflow, per capita income, consumption and literacy rate but is negatively correlated to unemployment rate.
The regression results for gross domestic product shows that a beta coefficient is positive for total remittance inflow, broad money supply, foreign aid, industrial production, inflation and foreign direct investment. The result indicates that higher the total remittance inflow, broad money supply, foreign aid, industrial production, inflation and foreign direct investment, higher would be gross domestic product.
Similarly, the regression results for poverty alleviation show that the beta coefficient is negative for unemployment rate. Thus, the result indicates that higher the unemployment rate, lower would be the poverty alleviation. The beta coefficients are positive for total remittance inflow, per capita income, consumption and literacy rate. The result hence indicates that higher the per capita income, higher would be the poverty alleviation. Similarly, higher the consumption, higher would be the poverty alleviation. The result also shows that higher the literacy rate, higher would be the poverty reduction.
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Impact of remittance on economic growth and poverty alleviation in Nepal [printed text] / Yegya Bahadur K.C, Author . - 2017 . - 90p. ; GRP/Thesis + 10/B. Languages : English | Descriptors: | Remittance
| | Class number: | 332.042 | | Abstract: | Remittance is a transfer of money by foreign worker to his or her home country. Remittance can also be referred as monetary payment transferred by a customer to a business from one place to another (Mafruhah et al., 2012). In the worldwide economy, remittances represent one of the major international flows of financial resources. Worker remittances constitute an increasingly important mechanism for the transfer of resources from developed to developing countries, and remittances are the second-largest source, behind foreign direct investment, of external funding for developing countries. Sometimes the flows of remittances can exceed the flows of foreign direct investment (Shera & Meyer, 2013).
Inflows of remittances increase the economic growth and reduce the poverty by stimulating the income of the recipient country, reducing credit constraints, accelerating investment and enhancing human development through financing better education and health (Jongwanich (2007); Gupta etal.(2009). However, Chami et al. (2005) found that remittances have negative impacts on economic growth of recipient country because a significant flow of remittances reduce labor force participation and work efforts which lowers output. Thus, the impact of remittances on economic growth and development of recipient country has been controversial.
According to ArefAssaf (2015), there is a positive effect of remittances on GDP. On the other hand the effects of other traditional sources of economic growth, such as gross fixed capital formation showed that there is a positive effect on GDP, a negative effect of foreign direct investment on GDP, while no significant effect of labor force on GDP. Similarly, Faini (2002) argued that remittances overcome capital market imperfections and allow migrant households to accumulate positive assets.
Glytsos (1993) examined the impact of remittances on output using data from 1969 to 1998 for Egypt, Greece, Jordan, Morocco, and Portugal. For Egypt, Jordan, and Morocco the growth-generating capacity of rising remittances characteristic is smaller than the growth-destroying capacity of falling remittances. Therefore, the large fluctuations in the real value of remittances contribute to large fluctuations of output growth and cause instability in the economies concerned. Kaufmann et al. (2004) found a robust positive relationship between growth and gross capital formation, as well as between growth and some of the institutional variables. The study also found some evidence of a positive relationship between growth and total remittances. Similarly, Azam & Khan (2011) found that worker remittance has significant and positive effects on economic growth.
Javidet al. (2012) investigated the importance of remittances inflow and its implication for economic growth and poverty reduction in Pakistan. By using ARDL approach, the study analyzed the impact of remittances inflow on economic growth and poverty in Pakistan for the period 1973-2010. The empirical evidence showed that remittances effect economic growth positively and significantly. Furthermore, the study also found that remittances have a strong and statistically significant impact on poverty reduction. Similarly, Giuliano (2008) found that remittances boost growth in countries with less developed financial system as it provides an alternative way to finance investment and reduce liquidity constraints. Workers’ remittances also play an important role in human capital investment in the recipient country through relaxing resource constraints. Rajan &Subramanian (2005) found a robust and significant positive effect of remittance on long-term growth.
Jongwanich (2007) examined the impact of workers’ remittances on growth and poverty in Asia-Pacific developing countries. The empirical evidence showed that remittances have a significant impact on poverty reduction and trivial impact on growth. Similarly, Burgess and Vikram (2005) examined the different channels through which remittances can affect economic activity. The study does not clearly support the short term stabilizing effect on consumption, however the longer term economic effect of such flows seems to be ambiguous. Catrinescu et al. (2009) explored that remittances exert a weak positive impact on long term macroeconomic growth. Furthermore, the study also supported the idea that development impact of remittance enhances in the presence of sound macroeconomic policies and institution.
The majorobjective of the study is to examine the impact of remittance on economic growth and poverty alleviation in Nepal.The study is based on the secondary data, which were gathered from 1995/96 to 2014/15, leading to a total of 20 observations. The main sources of data are Economic Survey, Monetary Policy and different reports published by NRB, reports published by World Bank, and different issues and reports published by Ministry of Finance.
The correlation analysis shows that gross domestic product is positively correlated to total remittances inflow, broad money supply, foreign aid, industrial production, inflation and foreign direct investment. Similarly, poverty alleviation is positively correlated with total remittance inflow, per capita income, consumption and literacy rate but is negatively correlated to unemployment rate.
The regression results for gross domestic product shows that a beta coefficient is positive for total remittance inflow, broad money supply, foreign aid, industrial production, inflation and foreign direct investment. The result indicates that higher the total remittance inflow, broad money supply, foreign aid, industrial production, inflation and foreign direct investment, higher would be gross domestic product.
Similarly, the regression results for poverty alleviation show that the beta coefficient is negative for unemployment rate. Thus, the result indicates that higher the unemployment rate, lower would be the poverty alleviation. The beta coefficients are positive for total remittance inflow, per capita income, consumption and literacy rate. The result hence indicates that higher the per capita income, higher would be the poverty alleviation. Similarly, higher the consumption, higher would be the poverty alleviation. The result also shows that higher the literacy rate, higher would be the poverty reduction.
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