An Impact Analysis of Remittance Inflows on Reducing Income-based Poverty in South Asia

Abstract

The purpose of this paper is to empirically examine the role of remittance inflow in reducing poverty in the South Asian region. A time-series dataset of the South Asian region for the period 1980–2021 is being considered for this study, and the autoregressive distributed lags model has been applied to examine the short- and long-run relationship between remittance inflows along with control variables, including inflation, trade openness and economic growth on poverty reduction. The results indicated that remittances have a substantial effect on poverty in both the short and long run. While inflation appeared to be a barrier to poverty reduction in the long term. Lastly, trade openness was also found to negatively affect poverty in the long run. It is the first inference in the context of South Asia that has captured income-based poverty in the form of household consumption expenditure. The study suggests that economic policymakers should devise the policy in such a manner that remittance inflows can be used for investment rather than only for consumption. Furthermore, inflation should be kept under control in the long run, and trade policies should be designed in such a way that they provide leverage to small-scale entrepreneurs, thereby reducing poverty in the long run. JEL Codes: F24, F62, F63, P46