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The effect of remittances on the Indian economy

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Abstract

The paper analyzes the effect of remittances on selected Indian macroeconomic variables, including output growth, inflation, exchange rate, stock returns, and the money supply. We further divide remittances into an increase and decrease in remittances to explore the asymmetric effect of remittances. Using a novel local projection method and quarterly data from 1997Q2 to 2019Q4, it is found that remittances have a significant and asymmetric effect on the Indian economy. The increase in remittances has an immediate effect, while the decrease in remittances has a delayed effect by around 6 to 8 quarters. The study concludes by arguing that not only the growth of remittances but also their asymmetric effect may be crucial for policy analysis.

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Data availability

All the data used in the study is publicly available from the published sources of the Handbook of Statistics, Reserve Bank of India, and Federal Reserve Economic Data (FRED).

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  1. Narsee Monjee Institute of Management Studies, School of Business Management, Jadcherla, Hyderabad, Telangana, 509301, India

    Irfan Ahmad Shah

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  1. Irfan Ahmad Shah
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Dr. Irfan Ahmad Shah is the single author of the paper, and all the contributions belong to him.

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Shah, I.A. The effect of remittances on the Indian economy. Int Econ Econ Policy (2024). https://doi.org/10.1007/s10368-024-00611-1

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