Assessing the Role of Remittances and Selected Major Macroeconomic Factors in South Asia's Economic Growth: Evidence from Panel Data Econometrics
DOI:
https://doi.org/10.48165/sajssh.2024.6206Keywords:
Remittances, Economic Growth, Macroeconomic Factors, South Asia, Panel DataAbstract
This study investigates the role of remittances and major macroeconomic factors in driving economic growth in South Asia, focusing on their interrelations and contributions using panel data econometrics. The research employs a dataset of 160 observations from the World Bank, including variables such as GDP, remittances, exports, imports, consumption, capital formation, and inflation. A random effects regression model is utilized, selected through the Hausman test for its robustness over a fixed effects approach. Stationarity tests confirm data suitability for regression analysis. Results reveal that remittances positively and significantly influence GDP, with a 1% increase in remittances leading to a 0.068% rise in GDP. Exports and imports also bolster GDP growth, while inflation exerts a negative impact, highlighting the critical need for macroeconomic stability. However, foreign direct investment (FDI) shows a negative association with GDP, suggesting structural inefficiencies in the region's FDI landscape. The study is constrained by the absence of data on informal remittance flows, which may influence the comprehensiveness of the findings. The results underscore the need for policymakers to optimize remittance utilization, enhance trade policies, and ensure macroeconomic stability to sustain growth. Effective remittance management can enhance household welfare and economic equity in South Asia, fostering inclusive development. This research provides a nuanced analysis of remittances as a growth driver in South Asia, emphasizing their interplay with trade and macroeconomic stability. It offers actionable insights for sustainable economic development in the region.
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