Impact of remittances on exports and economic growth: a cross country analysis

Abstract

Abstract We present robust results on the impact of remittances on exports and economic growth for panel data sets of 38 high-income and 50 middle-income countries for 2000-2020. First, we estimate the impact of remittances on exports after controlling economic growth. By panel dynamic panel estimation, when regressing remittances on exports, remittances show an inverse U-shaped relationship with a threshold value of ln(12.63) for high-income and ln(15.66) middle-income countries above which exports begin to rise. Economic growth is showing a positive and significant impact on exports. Second, we estimate the impact of remittances and exports on economic growth after controlling various macro determinants of economic growth. On economic growth, remittances present a U-shaped relationship with threshold value ln (12.63) for higher income and ln(15.66) for lower-income countries above which economic growth starts to decline. Exports are showing a positive and significant effect on economic growth. A 100% increase in exports leads to a 15% and 12% increase in exports of high-income and middle-income countries. The other variables like physical capital per labour and human capital are showing a positive and significant impact on economic growth. Government expenditure has a negative coefficient, thus, it deteriorates economic growth.