Economic Determinants of Workers’ Remittances in Pakistan
Workers’ remittances have become the second foremost source of monetary flows to developing countries. Pakistan has experienced fluctuations in economic indicators in the past that hindered the flow of workers’ remittances in the country. According to World Bank data, Pakistan has become fifth largest remittances receiving developing country in 2011. This paper explores the economic determinants of workers’ remittances of Pakistan using annual data spanning from 1990 to 2010. Research aims to analyze the extent to which multi variables impacts the flow of workers’ remittances in Pakistan. The research is causal and explanatory in nature and follows quantitative research design. This study identifies empirically verified economic determinants of workers’ remittances of Pakistan by using multiple regression. The quantitative substantiation of multiple regression analysis shows that FDI, exchange rate and GDP appeared to be important determinants of workers’ remittances, other determinants of workers’ remittances are inflation rate and interest rate. In particular, workers’ remittances increased with the increase in GDP and FDI. Contrasting to this, rise in interest rate and fluctuation in inflation level lowers the inflows of workers’ remittances in Pakistan, as greater insecurity in relation to price changes in future period and high inflation reduces the return on funds remitted.
KeywordsRemittances (R) Foreign direct investment (FDI) Inflation rate (IR) Gross domestic product (GDP) Real interest rate (RIR)
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