Macroeconomic Determinants of Remittances: A Case of Developing Country

The importance of the flow of workers’ remittances in the economies of developing countries during the last few d/ecades or so cannot be ignored at the face changing global order where most of the economies in the world are transforming themselves to the call of globalization and transmuting towards more open markets with freer flows of goods and factors across borders. The macroeconomic impacts of remittances flows on developing economies are not well understood. The paper is an attempt to understand the impact of inward remittances flows on per capita GDP growth in Bangladesh during 1974-2006. This study find that the growth effect of remittances is negative at first but becomes positive at a later stage- a strong evidence of a non-linear relationship. This could be due to unproductive use of remittances in the beginning followed by more productive utilisation. Remittances positively affect per capita GDP growth in Bangladesh when the complementarity between remittances and financial development is incorporated into the analysis.