Volume 8, Issue 1, February 2019, Page: 31-40
Remittances and Economic Growth in a Small and Volatile Economy
Morad Abdel-Halim, General Budget Department, Ministry of Finance, Amman, Jordan
Adel Bino, Department of Finance, University of Jordan, Amman, Jordan
Received: Jan. 16, 2019;       Accepted: Feb. 27, 2019;       Published: Mar. 20, 2019
DOI: 10.11648/j.ijber.20190801.15      View  39      Downloads  26
This paper investigates the relationship between worker remittances and economic growth in a small country with volatile macroeconomic conditions (namely, Jordan). Previous research determines three main channels through which the impact of remittances can be transmitted: labor supply, capital accumulation and investment, and productivity. A historical behavior of these variables since 1976 to 2016 is analyzed and discussed in the context of the Jordanian economic structure. The Autoregressive Distributed Lag (ARDL) model that allows economic growth (measured by growth in per capita GDP) and financial development (measured by bank credit) to be affected by their lagged values and by current and lagged values of remittances (measured by remittances as percentage of GDP) is used to test for equilibrating and long-term associations between remittances and economic growth and financial development indicators. The results show that although Jordanian worker remittances represent a vital source of financial flows, they are not used to smooth consumption by receiving households and have no impact on economic growth or financial development. Instead, they lead to increase in imports and trade deficit. Thus, if reverse migration of Jordanian workers takes place, it will lead to sudden increase in skilled labor supply, which will exacerbate Jordan’s unemployment problems.
Remittances, Economic Growth, Financial Development, Trade Deficit
To cite this article
Morad Abdel-Halim, Adel Bino, Remittances and Economic Growth in a Small and Volatile Economy, International Journal of Business and Economics Research. Vol. 8, No. 1, 2019, pp. 31-40. doi: 10.11648/j.ijber.20190801.15
Copyright © 2019 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Acosta, Pablo A., Emmanuel K. K Lartey, and Fredrica Mandelman, (2008), “Remittances, Exchange Rate regimes, and the Dutch Disease: A panel data Analysis,” Federal Reserve Bank of Atlanta Working Paper No. 2008-12 (Atlanta: Federal Reserve Bank).
Aggarwal, R., Demirguc-Kunt, A. and Martinez Peria, M. (2006). “Do Remittances Promote Financial Development?” Evidence from a Panel of Developing Countries.” World Bank mimeo.
Barajas, Adolfo, Ralph Chami, Connel Fullenkamp, Michael Gapen and Peter Monteil, (2009), “Do Workers’ Remittances promote Economic Growth?” IMF Working Paper 09/153 (Washington: International Monetary Fund).
Bel-Air, F. (2016), “Migration Profile: Jordan”, Robert Shuman Center for Advanced Studies, Migration Policy Center.
Chami, Ralph, Adolfo Barajas, Thomas Cosimano, Connel Fullenkamp, Michael Gapen, and Peter Montiel, (2008a), Macroeconomic Consequences of Remittances, IMF Occasional Paper No. 259 (Washington: International Monetary Fund).
Chami, R., C. Fullenkamp, and S. Jahjah, (2003), “Are Migrant Remittance Flows a Source of Capital for Development?” IMF Working Paper, International Monetary Fund, Washington D. C.
Chami, Ralph, Thomas F. Cosimano, and Michael T. Gapen, (2008b), “Beware of Emigrants Bearing Gifts: Optimal Fiscal and Monetary Policy in the Presence of Remittances,” IMF Working Paper 06/61 (Washington: International Monetary Fund).
Fayissa, B., & Nsiah, C. (2010). The Impact of Remittances on Economic Growth and Development in Africa. The American Economist, 55(2), 92–103.
Ghosh Dastidar, S. (2017). Impact of Remittances on Economic Growth in Developing Countries: The Role of Openness. Global Economy Journal, 13(1), pp. -. Retrieved 23 Jan. 2019, from doi:10.1515/gej-2016-0066.
Giuliano, Paola, and Marta Ruiz-Arranz (2009). "Remittances, financial development, and growth." Journal of Development Economics 90.1: 144-152. ‏
Hakura, M. D., Chami, M. R., & Montiel, M. P. (2009). Remittances: an automatic output stabilizer? (No. 9-91). International Monetary Fund.
Nsiah, C. and Fayissa, B. (2013), “Remittances and economic growth in Africa, Asia, and Latin American-Caribbean countries: a panel unit root and panel cointegration analysis”, Journal of Economics and Finance, Vol. 37 No. 3, pp. 424-441.
Nicholas P. Glytsos, (2005) "The contribution of remittances to growth: A dynamic approach and empirical analysis", Journal of Economic Studies, Vol. 32 Issue: 6, pp.468-496.
Pradhan, Gyan., Mukti Upadhyay, and Kamal Updhyaya, (2008), “Remittances and economic Growth in Developing Countries,” The European Journal of Development Research, 20.3: 497-506.
Richard H. Adams JR (2011) Evaluating the Economic Impact of International Remittances On Developing Countries Using Household Surveys: A Literature Review, Journal of Development Studies, 47:6, 809-828.
Ruiz, Isabel, Elias Shukralla, and Carlos Vargas-Silva (2009). "Remittances, institutions and growth: a semi parametric study”. International Economic Journal 23.1: 111-119. ‏
Senbeta, Aberra (2013), Remittances and the sources of growth, Applied Economics Letters, 20:6, 572-580, DOI: 10.1080/13504851.2012.718057.
Browse journals by subject