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Remittances and output in Bangladesh: an ARDL bounds testing approach to cointegration

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Abstract

Although the relationship between remittances and output is still inconclusive in literature, most studies find that remittances have a positive effect on output in the long run. Contrary to this conventional direction of causality from remittances to output, our study finds that output alone determined long-run movements in remittances in a positive direction in the Bangladesh economy over the last 35 years from 1976 to 2010. We use the autoregressive distributive lag (ARDL) bounds testing approach to cointegration to explore this long-run relationship. Surprisingly, remittances do not appear to be a long-run forcing variable to the explanation of Bangladesh’s output over the same period. While examining the channels of this output–remittance mechanism remains an area of research for the future, we hypothesize that the rise in remittances in response to increased income occurs through higher import demand and greater investment opportunities. This finding implies that Bangladeshi policymakers can influence remittances through national output in the long run.

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Acknowledgments

The authors are thankful to the anonymous referees whose valuable comments on the previous versions substantially helped improve this study.

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Authors and Affiliations

  1. Department of Economics, State University of New York at Cortland, Cortland, NY, 13045, USA

    Biru Paksha Paul

  2. Department of Business Administration, East West University, Dhaka, 1212, Bangladesh

    Md. Gazi Salah Uddin

  3. Department of Economics and Finance, University of New Orleans, Louisiana, LA, 70148, USA

    Abdullah M. Noman

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  1. Biru Paksha Paul
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  2. Md. Gazi Salah Uddin
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  3. Abdullah M. Noman
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Correspondence to Biru Paksha Paul.

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Paul, B.P., Uddin, M.G.S. & Noman, A.M. Remittances and output in Bangladesh: an ARDL bounds testing approach to cointegration. Int Rev Econ 58, 229–242 (2011). https://doi.org/10.1007/s12232-011-0120-2

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