20

1
Quaid-i-Azam University Islamabad
 2
Quaid-i-Azam University Islamabad
 Remittances, Inflation and Economic Growth

Submitted By: Submitted To:

Sher Khan Dr. Javed Iqbal

Shagufta Yasmeen

School of Economics
Quaid-i-Azam University Islamabad, Pakistan
Session: (2018-2020)

3
Quaid-i-Azam University Islamabad
 Contents

Abstract 5

1. Introduction 6
1.1. History of Remittances in Pakistan 6
1.2. Objectives of study 7
1.3. Significance of study 7
2. Theoretical Background 8
3. Literature Review 9
4. Estimation strategy 10
4.1. Stationerity of data 10
4.2. Auto regressive distributed lag model 10
4.3. Data Types, Sources and Variable 11
5. Estimation Results 12
5.1. Correlation Analysis 12
5.2. Descriptive Statistics 13
5.3. Augmented Dickey Fuller 14
5.4. ARDL Bound test 14
6. Conclusion and policy recommendation 19

References

4
Quaid-i-Azam University Islamabad
A
bstract
The influx of foreign remittances in Pakistan has been an important source of
foreign exchange in Pakistan while economy of Pakistan being a consumption
oriented economy makes it interesting to explore the nexus between foreign
remittances, inflation and GDP in Pakistan. For his determination present
study examines relationship between GDP, Inflation and economic variables like Financial
Aid, foreign direct investment, household consumption, real effective exchange rate and
remittances. Stationerity of variables involve combination of both level and 1st level
stationarity, so here ARDL is best to use for short run and long run relationship. In short run
analysis of equation 1 foreign direct investment and real effective exchange rate is
significant, while in long run foreign direct investment, Household consumption and
Remittances influenced Inflation while Financial Aid and Real Effective Exchange Rate have
no impact in long run.

In short run analysis of equation 2 Household consumption, Real Effective Exchange Rate
and Remittances influences GDP, while Lag of Foreign Direct Investment is significant on
10%. Financial Aid and Foreign Direct Investment have no impact on GDP. While Financial
Aid, Household consumption and Real Effective Exchange Rate have significant impact on
GDP in long run and Foreign Direct Investment and Remittances have no relationship with
GDP.

5
Quaid-i-Azam University Islamabad
 Chapter 01

1) Introduction
Remittances have the main and important source of inflow from foreign countries. It is
basically drive by the residence of the country from outdoor the country. In developing
countries this is the main source of income of household. In this study we are going to
examine the impact of remittances on inflation and economic growth.

Inflow of Remittances from overseas to the developing countries mostly increases the
consumption of the household and sometime it is used in the investment sector to improve
and quicken the economic growth of the country.

The developing countries are the major beneficiaries of foreign remittances (World Bank,
2011). Countries which are less developed are the main benefactors of foreign remittances.
Remittances received directly by the household in developing countries and other inflow like
foreign aid and other funds received by the public agencies in less developed countries.

Remittance is a significant source of foreign exchange earnings for Pakistan since 1970.
Throughout the past four decade Pakistan received momentous amount of remittances,
however, variation were also witnessed in the inflow of remittances. Inflow of remittances
affects economic growth positively by reducing current account deficit, improving the
balance of payment position and reducing dependence on external borrowing (Iqbal and Sttar,
2005)

Estimate indicates that the flow of remittances from the middle east is highest reaching the
point of 13.6% of GNP growth, while adding the inflow of remittances through unofficial
channels it reaches almost 24% of GNP growth during the sub period 1973-74 - 1976-77 this
is about one fourth of the total GNP growth and this is just because the rapid increase in the
remittances in the specified period. The annual growth rate of GNP i.e. 8.7 percent was
recorded in the specified time period of during the sub period 1973-74 - 1976-77.During this
period the remittances through official channels are recorded 10 percent of the GNP growth
in middle east but when remittances goes in decline and became negative during the period of
1982-83 to 1985-86 the annual growth rate of GNP dropped to 6.5 percent (Burney 1987).

1.1) History of Remittances in Pakistan

Inflow of remittances in Pakistan was at $412 US Million and constantly it increases with the
time till it reaches to $2940 US Million in 1983 and after this year it start decreasing reaching
to the point $2580 US Million in 1984 and reaches to $1870 US Million in 1988 and after this
it again rises but not that much as it was in 1983. In 1989 it start increasing and reach to the
amount of $ 2,020 US Million in 1989 again in 1990 it touches the $ 1,550 US Million and so
on, in these years remittances show a trend, sometime increase and sometime decrease but it

6
Quaid-i-Azam University Islamabad
touches the lowest value that was $996 US Million in 1999. But after 2000 it have the
positive trend and start increasing from the point of $ 1,080 US Million to $19,801 US
Million.
(World
20000 Bank,
18000 November
16000 16, 2016)
14000
12000
10000 Year
8000 Inflow of Remittances
6000
4000
2000
0
1988
1976
1979
1982
1985

1991
1994
1997
2000
2003
2006
2009
2012
2015

Inflow Of Remittances For Pakistan

1.2) Objectives of the Study

On the basis of the above discussion and literature studied following are the
objectives of the study.

1. To examine short run and long run relationship between GDP and
remittances.
2. To examine the short run and long run relationship between inflation and
remittances.
1.3) Significance of the Study
Inflow of remittances is the main source of income for the household of developing countries
and it affects directly our consumption and production pattern. As in the above literature it is
showed that some of the researcher used to examine the relation between inflation and
remittances and some of them are determining the relationship between remittances and
economic growth. Our study is different from the previous studies in term of time period that
in this study data is taken from 1980-2017 for Pakistan and also in term of variable that this
study adopted to determine both the short run and long run impact of remittances on inflation
and economic growth, this study uses both of the variable in same study.

7
Quaid-i-Azam University Islamabad
 Chapter 02

2) Theoretical Background
Remittances can have multiple effects on the recipient country, when remittances are used
by the individuals to increased their consumption level it increases the consumption and
tends to increase in the price level, leads to the increase in the inflation rate and when
remittances is used by recipient country as investment in developmental projects, due to it
the output capacity of the country increases, leads to increase in the standard of living,
reduces poverty and also decreased unemployment level. it can be used in the
developmental projects.

Remittances play an important role in the social benefits like it increase the education level
in the recipient country and also it improves the living standard and also reducing poverty.
(Cáceres and Saca, 2006). Remittances have positive and significant linkage with economic
growth and remittances are also accountable in cutback of poverty in Pakistan (qayyum et
al,2008).

Remittances effect the inflation rate in the recipient economy on many ways like due to
remittances it increase the purchasing power of the country individuals, causes demand pull
inflation. The increase in the consumption pattern with no such increase in real output of
the country lifts up commodity prices, causing the inflation rate high. (Iqbal et al, 2013)

According to World Bank, Pakistan is the 7th largest remittances recipients economy,
remittances has positive impact on Pakistan’s economy (Hussain and Abbas, 2014).

the remittances were highest during the period of 1982-83 and contributed about 10.06
percent of GDP, At the beginning of 21st century, remittances have increased very sharply
during the period of 2001-02 to 2002-03, Afterward, remittances sent home by migrants
showed a rising trends. (Muhammad and Ahmed, 2009)

there are main two effects can be kept by remittances specially in developing countries,
either it support inflation by increasing the purchasing power on recipient country or either
it helps to increase the economic output of the recipient country and helps it to be in one of
the developed countries.

8
Quaid-i-Azam University Islamabad
 Chapter 03

3) Literature Review
The reason behind selecting this topic is just that this is a very important topic in the context
of Pakistan. Due to low wages in Pakistan most of the labour works in foreign countries and
send share of their income to Pakistan which is remittances for Pakistan. As Pakistan is
consumption oriented economy so remittances are mostly used in consumption of goods
which in turn increase the general price level in Pakistan. Further the worker’s remittances
are considering second largest source of finance in developing countries after FDI.

Further Qayyum et al (2008) study works on the province level and results suggest that
remittances have positive impact on economic growth as well as results of the study of
Zeeshan et al (2016) also suggest that there is positive relation between economic growth
and remittances as inflow of remittances accelerate the economic growth, likewise, Cáceres
(2004) results of the study stated that remittances improve the monthly economic activity of a
country and it also stated that it have the negative impact on interest rate same as the above
studies Khalid (2012) observed that the inflow of remittances has the long run impact on
the country’s economic performance but Ravshanbek(2011) results suggest that there is both
short run and long run impact of remittances on economic growth in a positive aspect. Later
on Ghulam et al (2014) and Mobeen et al (2014) results of the study also stated that there is
positive relation between workers remittances and economic growth and studies also suggest
that there should be smooth channel for the inflow of remittances through which the
government insure more remittances which can be used to improve the economic condition of
a country but the study of Nishat et al (1991) stated that most of the remittances are used by
the consumption side and a part of the remittances are used in private investment like this
study of Roberts et al (2009) also suggest that the large amount of remittances used for the
consumption purposes but it also play an important role in developmental goals furthermore
it also lowers the interest rates but the study of Malik et al (2009) the study suggest that the
remittances mostly used for consumption and partially used for imports but due to multiplier
effect it also have positive impact on economic growth. Different from the above studies the
results of Javed et al (2013) and Narayan et al (2011) stated that inflation occurs due to the
inflow of remittances but here the study of Ruiz et al (2010) states that there is no such
shocks of inflation due to remittances in case of Mexico. While the study of Kock et al
(2011) stated the remittances can be increase only when the labour of the country is skilful
and there is migration of country’s labour to foreign countries so on the basis of these studies,
this study is carried out to determine the short run and long run relationship between
remittances, inflation and economic growth for the time span of 1990-2018 for Pakistan.

9
Quaid-i-Azam University Islamabad
 Chapter 04

4) Estimation strategy.
Augmented dickey fuller test (ADF) is used in this study to check for the stationerity of the
data and Auto Regressive distributed Lag model (ARDL) bound test is used to check both
short run as well as long run relationship between the variables and it is Suggested by
pesaran et al (2007).

4.1) Stationerity of data

The nexus between remittances, inflation and economic growth is tested in this study. Data
used in this study is time series from time span of 1980-2017 for Pakistan. To check the
stationarity of the data augmented dickey fuller test (ADF) is used. whenever the time series
data is used then first should analyse the problem of unit root, as there is mostly the problem
of unit root in time series data.to perform ADF include extra lag length in the model and the
optimum lag length is choose on the basis of Aickek Information criteria (AIK/AIC) and
model.

4.2) Auto Regressive Distributed Lag Model

Co-integration test is used to check the long run association between the variables. Frequently
in the literature, Auto Regressive Distributed Lag Model (ARDL) was used. ARDl test is
device by Pesaran et al (2007).it is used to inspect the short run as well as long run
relationship between the variables. Its main benefit is that can be applicable whether all the
variables are stationery at level or at first difference or combination of both. It have one main
assumption that some or All variables should not be stationery at second level, if the variable
is on second difference and we run OLS so it will be spurious regression. The equation for
the ARDl Test is,

INFt = α + β1LFAIDt-i + β2FDIt-i + β3HCON t-i + β4 LREERt-i= +𝜷𝟓 𝑹𝑬𝑴 Ut (1)

since our study exhibit two dependent variables, GDP and Inflation that’s why study consists
of two models. One is with inflation as dependent variable and other is with GDP as
dependent model.

LGDPt = α + β1LFAIDt-i + β2FDIt-i + β3HCON t-i + β4 LREERt-i= +𝜷𝟓 𝑹𝑬𝑴 Ut (2)

Where INF stands for inflation, LGDP stands for Log of GDP, LFAID stands for Log of financial
AID, FDi stands for foreign direct investment, HCON stands for household consumption,
LREER stands for log of real effective exchange rate and REM stands for Remittances.

10
Quaid-i-Azam University Islamabad
4.3) Data Types, Sources and Variable
Since the study is based on the secondary data the data for all economic variables is taken
from world development indicators (WDI) for time span of 1980-2017 including 36
observations. As study is based on secondary data the data for inflation is consumer price
index (Annual Percentage), Remittances as Personal remittances, received (% of GDP), Real
effective exchange rate index (2010 = 100), GDP (Current US $), Household Consumption as
Household final consumption expenditure, etc. (% of GDP), FDI as Foreign direct investment,
net inflows (% of GDP), FAID as Net official development assistance and official aid received
(current US$). Taking log of some of the variables to make it in percentage. Data taken in
this study is secondary and time series and taken from world development indicator (WDI).

Variables Symbols Source

Inflation INF WDI

GDP GDP WDI

Personal remittances received Rem WDI

Financial Aid FAID WDI

Foreign Direct Investment FDI WDI

Household Consumption HCON WDI

Real effective exchange Rate REER WDI

11
Quaid-i-Azam University Islamabad
 Chapter 05

5) Estimation Results
Data used in this study is secondary data, time series in nature and taken from the world
development indicators (WDI). Following are the tables concluded about the data. First is
correlation analysis then descriptive statistics. After that augmented dickey fuller (ADF) is
used to check stationerity of data and then auto regressive distributed lag model is used to
check the short run and long run relationship between variables.

5.1) Correlation Analysis

Table below represents the correlation among the variables. FAID represents financial Aid,
FDI represents the foreign direct investment, GDP shows gross domestic product, HCON
represents household consumption, INF demonstrates inflation and REER represents real
effective exchange rate. There are both positive and negative relationships amongst the
variables. The result shows that there is same value in diagonal, so it can be stated that there
is no sign of Multicollineairity in the variables.

FAID FDI GDP HCON INF REER REM

FAID 1.000000
FDI 0.168219 1.000000
GDP 0.884314 0.223490 1.00000
0
HCON 0.350537 -0.042889 0.44930 1.000000
1
INF 0.049818 0.382513 0.07773 0.019511 1.000000
7
REER -0.447912 -0.466723 - 0.398900 -0.085158 1.000000
0.502778
REM 0.150201 -0.395548 0.11298 0.723663 -0.133981 0.692998 1.000000
9

12
Quaid-i-Azam University Islamabad
 5.2) Descriptive Statistics

Mean Medi Max Min Std. Skew Kurt J.B Prob Sum Sum O
an Dev ness osis Sq bs
Dev
FAID 1.64E 1.38E 3.75E 7.07E 9.09E 0.957 2.72 5.927 0.051 6.22E 3.06E+ 38
+09 +09 +09 +08 +08 663 5546 677 620 +10 19
FDI 0.901 0.616 3.668 0.102 0.824 2.098 6.83 51.18 0.000 34.27 25.136 38
909 910 323 667 234 655 5437 597 000 253 40
GDP 1.01E 6.31E 2.71E 2.37E 7.85E 0.895 2.30 5.842 0.053 3.86E 2.28E+ 38
+11 +10 +11 +10 +10 763 6954 302 872 +12 23
Hcon 77.11 77.29 83.09 68.21 4.107 - 1.87 2.488 0.288 2930. 624.17 38
587 712 578 635 254 0.274 3194 674 132 403 29
819
INF 8.295 7.766 20.28 2.539 3.778 0.733 3.87 4.626 0.098 315.2 528.13 38
362 884 612 516 080 291 8300 931 918 238 38
REER 125.6 111.3 228.9 93.71 38.61 1.499 3.84 15.38 0.000 4773. 55177. 38
255 230 828 685 726 792 8751 665 456 771 83
REM 5.094 4.964 10.24 1.453 2.249 0.230 2.20 1.327 0.515 193.5 187.19 38
715 763 763 638 282 599 9124 133 011 992 30

Above table shows the descriptive statistics of the data. Mean value of FAID is 1.64E+09,
minimum value is 7.07E+08, and maximum value is 3.75E + 09, while median is 1.38E + 09.
Mean value of fdi is 0.901909; median is 0.616910 while minimum value a 0.102667and
maximum value is 3.668323. GDP has the mean value 1.01E+11, median value is 0.616910
while minimum value is 2.37E+10 and maximum value is 2.71E+11. Hcon mean value is
77.11587, median value is 77.29712 while its minimum value is 68.21635 and maximum
value is 83.09578. The mean value for Inf is 8.295362, median is 7.766884, minimum value is
2.539516 and maximum value is 20.28612. mean value for Reer is 125.6255, median value is
111.3230 while minimum value is 93.71685 and maximum value is 228.9828. mean value
for remittances is 5.094715, median value is 4.964763 while minimum value is 1.453638 and
maximum value is 10.24763.

13
Quaid-i-Azam University Islamabad
5.3) Augmented Dickey Fuller Test Results

Adf is used to check the stationerity of variables. It is necessary to check the stationerity
level before going to further estimation. Results for ADF are as follows:

ADF Test Result

Variables At Level At 1st Results

Difference
Financial AID 0.930461 -6.908180 I~(1st)
-2.951125 -2.951125
FDI -2.717777 -4.100713 I~(1st)
-2.945842 -2.945842
GDP 1.053960 -3.276877 I~(1)
-2.945842 -2.948404
Household -1.339418 -4.036965 I~(1st)
Consumption -2.945842 -2.948404
Inflation -2.454235 -4.911137 I~(1)
-2.945842 -2.948404

Real Effective -4.584871 I~(0)

Exchange Rate -2.945842
Remittances -1.371029 -4.550791 I~(1st)
-2.945842 -2.948404
*10%, **5%, ***1% level of significance.

Above table shows that there is combination of stationery level among the variables at 5%
significance level. Except Real effective exchange rate all other variables are integrated at
first level while real effective exchange rate is integrated at level. So results of ADF suggest
using the ARDL bound test, as ARDL is best to use when there is combination different
integration level among variables.

5.4) Auto Regressive Distributed Lag Bound test

ARDl bound test is used to check both short run and long run relationship among variables,
it is suggested by pesaran et al (2007). We can’t use OLS in this study because most
variables in this study are integrated at first level. So ARDL is best to use in this study. Hence
we use two models in this study; equation (1) ARDL results are shown below:

14
Quaid-i-Azam University Islamabad
Bound Test
Date: 06/17/18 Time: 23:58
Sample: 1983 2017
Included observations: 35
Null Hypothesis: No long-run relationships exist

Test Statistic Value k

F-statistic 9.486347 5

Critical Value Bounds

Significance I0 Bound I1 Bound

10% 2.26 3.35

5% 2.62 3.79
2.5% 2.96 4.18
1% 3.41 4.68
Above table shows that F-statistc value (9.486347) is greater than the critical value at
5% significance level and it stated that there exists a long run relationship between
the variables.

Short Run Analysis

ARDL Cointegrating and Long Run Form
Dependent Variable: DINF
Selected Model: ARDL (2, 0, 2, 2, 2, 1)
Date: 06/17/18 Time: 23:59
Sample: 1980 2017
Cointegrating Form

Variable Coefficient Std. Error t-Statistic Prob.

D(DINF(-1)) 0.557172 0.204541 2.724004 0.0131

D(LFAID) 0.892407 1.741027 0.512575 0.6139
D(FDI) 2.880727 1.435559 2.006694 0.0585
D(FDI(-1)) -2.959839 1.580725 -1.872457 0.0758
D(HCON) 0.327531 0.295529 1.108284 0.2809
D(HCON(-1)) 0.535382 0.323871 1.653070 0.1139
D(LREER) -23.948345 10.408588 -2.300826 0.0323
D(LREER(-1)) -25.152135 10.181466 -2.470384 0.0226
D(REM) 0.878977 0.731789 1.201134 0.2437
CointEq(-1) -2.089876 0.292932 -7.134330 0.0000

Cointeq = DINF - (0.4270*LFAID + 1.8401*FDI -0.5205*HCON -3.0600

*LREER + 1.0696*REM + 37.9853 )

15
Quaid-i-Azam University Islamabad
Results suggested that Inflation is related with previous year inflation, financial Aid,
Household consumption and remittances has no impact on inflation in short run while
Foreign Direct Investment, Real Effective exchange Rate and Lag of Real effective Exchange
rate has impact on inflation in short run. CointEq (-1) is significant and negative and for co
integration it is necessary to be significant and also negative. It shows the convergence that
with how much speed, economy is converging towards equilibrium.

Long Run Analysis

Long Run Coefficients

Variable Coefficient Std. Error t-Statistic Prob.

LFAID 0.427014 0.827094 0.516282 0.6113

FDI 1.840075 0.402947 4.566540 0.0002
HCON -0.520477 0.129919 -4.006179 0.0007
LREER -3.060027 2.445048 -1.251520 0.2252
REM 1.069573 0.308081 3.471721 0.0024
C 37.985287 26.960213 1.408939 0.1742

Above table shows that foreign direct investment, household consumption and remittances
have long run relationship with inflation at 5% significance level while on the other financial
Aid and real effective exchange rate has no long run relationship with inflation.

5.5) ARDL results from equation (2).

In this model GDP is taken as dependent variable while other economic variables are taken
as independent variables. Following are the results of ARDL:
ARDL Bounds Test
Date: 06/17/18 Time: 23:56
Sample: 1982 2017
Included observations: 36
Null Hypothesis: No long-run relationships exist

Test Statistic Value K

F-statistic 4.279205 5

Critical Value Bounds

Significance I0 Bound I1 Bound
10% 2.26 3.35
5% 2.62 3.79
2.5% 2.96 4.18
1% 3.41 4.68

16
Quaid-i-Azam University Islamabad
Above table suggest that there is existence of Cointegration, as the F-statistics value
(4.279205) is greater than the critical value at 5% of upper boundary (3.79).so there
exist a Cointegration between variables.

SHORT RUN Analysis

ARDL Cointegrating and Long Run Form
Dependent Variable: LGDP
Selected Model: ARDL(1, 2, 2, 1, 2, 2)
Date: 06/17/18 Time: 23:56
Sample: 1980 2017
Included observations: 36

D(REM(-1)) -0.020123 0.012628 -1.593477 0.1267

CointEq(-1) -0.303054 0.065946 -4.595459 0.0002

Cointegrating Form

Variable Coefficient Std. Error t-Statistic Prob.

D(LFAID) 0.016698 0.042412 0.393720 0.6980

D(LFAID(-1)) -0.070668 0.041842 -1.688905 0.1068
D(FDI) 0.003872 0.025783 0.150191 0.8821
D(FDI(-1)) 0.042837 0.023213 1.845391 0.0798
D(HCON) 0.014086 0.006642 2.120840 0.0466
D(LREER) 0.538544 0.211552 2.545676 0.0193
D(LREER(-1)) 0.277860 0.201951 1.375881 0.1841
D(REM) -0.053166 0.016774 -3.169525 0.0048
Cointeq = LGDP - (0.5938*LFAID -0.0440*FDI + 0.1013*HCON -1.8266
*LREER -0.0359*REM + 13.9670 )

Short Run results of the model suggest that there is short run relation between GDP
and household consumption, Real Effective Exchange Rate and Remittances while
there is no short run relationship between GDP and Financial AID and FDI while lag
of FDI is significant at 10% significance level. While the CointEq(-1) value is
significant and negative, which means that there is cointegratiion and it also shows
the convergence of the model if the economy towards equilibrium with the speed
0.3% annually. While the Financial AID, Foreign Direct Investment has no short Run
relationship with GDP while their lags has the relation with GDP.

17
Quaid-i-Azam University Islamabad
Long Run Analysis

Long Run Coefficients

Variable Coefficient Std. Error t-Statistic Prob.

LFAID 0.593826 0.199185 2.981286 0.0074

FDI -0.044017 0.053384 -0.824543 0.4194
HCON 0.101344 0.015951 6.353306 0.0000
LREER -1.826589 0.521100 -3.505257 0.0022
REM -0.035855 0.053716 -0.667502 0.5121
C 13.967010 6.486966 2.153088 0.0437

Above table shows that there is long run relationship between GDP and Financial Aid,
household consumption and real effective exchange rate while there is no long run relation
between GDP and FDI and remittances.

18
Quaid-i-Azam University Islamabad
 Chapter 6

6) Conclusion and policy recommendation

The determination of the study is to check the influence of multiple economic variables like
financial Aid, household consumption, real effective exchange rate remittances and foreign
direct investment on GDP and also on the inflation. Data is taken from the WDI and it is
secondary in nature. In this study we first regress inflation on all the economic variables and
then GDP on all economic variables because it’s the significance of this study that we include
both of the variables in the same study.

In short run analysis lag of previous year inflation and real effective exchange rate, foreign
direct investment and real effective exchange rate is significant in short run while Foreign
direct investment, Household consumption and Remittances have long run relationship with
Inflation while Financial Aid and Real Effective Exchange Rate have no impact on Inflation
in long run.

In short run Household consumption, Real Effective Exchange Rate and Remittances
influences GDP while Lag of Foreign Direct Investment is significant on 10% significance
level. Financial Aid and Foreign Direct Investment have no impact on GDP.

In long run Financial Aid, Household consumption and Real Effective Exchange Rate have
significant impact on GDP while Foreign Direct Investment and Remittances have no
relationship with GDP.

6.1) Policy Recommendation:

Pakistan is developing country and most of Pakistan labour is in foreign countries. Mostly
Remittances send by Pakistani’s people through illegal channel due to which it have
negative effect on GDP and also people of Pakistan’s is consumption oriented so
remittances have no influence on GDP but have positive relation with inflation.

1) Government should focus on the legal channels through which remittances can be
sending from foreign countries to home country. Due to this remittances will have
positive impact on GDP. People mostly send by illegal channels because it take less
time and also it take less cutting then legal channel. So government should make
such policies that smooth the channel of sending remittances through legal channel.
2) Government should make such policies due to which people invest their money
received by remittances and do not consume all of their income. So it will help
reduce inflation and also help people to make it in developmental way.

19
Quaid-i-Azam University Islamabad
6.2) References

Abdullaev, R. (2011). Impact of remittances on economic growth in selected Asian and Former Soviet
Union countries. School of Economics and Management, 41.

Ahmad, N. a. (2013). Foreign Remittances and Economic Growth in Pakistan: An empirical

investigation. Munich Personal RePEc Archive, 8.

Arif, A. Q. (2008). Impact of Remittances on Economic Growth and Poverty: Evidence from Pakistan.
Munich Personal RePEc Archive, 25.

Javed Iqbal, M. N. (2013). The Nexus between Foreign Remittances and Inflation: Evidence from
Pakist. Pakistan Journal of Social Sciences (PJSS), 12.

Khathlan, K. A. (2012). The Link between Remittances and Economic Growth in Pakistan: A Boon to
Economic Stability. British Journal of Economics, Management & Trade, 19.

M. Mobeen Shafqat, A. A. (2013). Impact of Worker Remittances on Economic Growth of Pakistan:

Analysis of Pakistan’s Economy. journal business researck turk, 9.

Muhammad, m. a. (2009). Dynamic Impact of Remittances on Economic Growth: A Case Study of

Pakistan. Forman Journal of Economic Studies, 16.

Rashid Hussain, G. A. (2014). Worker’s Remittances and GDP Growth in Pakistan. International
Journal of Economics and Financial Issues , 6.

Saca, L. R. (2005). What Do Remittances Do? Analyzing the Private Remittance Transmission
Mechanism in El Salvador. international monetary fund, 32.

Syed Zeeshan Zafar, M. S. (2016). The Economic Implications of Remittances on Economic Growth:
The Case Study of Pakistan. International Journal of Academic Research in Business and
Social Sciences, 8.

20
Quaid-i-Azam University Islamabad