Impact of Remittance on Economic Progress: Evidence from Low-Income Asian Frontier Countries

This paper attempts to know the contribution of remittances to the economic progress of three low-income Asian frontier countries namely Bangladesh, Sri Lanka, and Vietnam. This study applies pooled ordinary least squares (OLS), fixed effect, and random effect models to know the aggregate impact of remittances on economic development using panel data from 1990 to 2019. Vector error correction model and granger causality have been used to know the country-specific impact. The regression results indicate a significantly negative impact of remittances on the economic progress of sample countries. In Bangladesh, remittances have neither short-run nor long-run association; while in Vietnam, there exits short-run association but no long-run association. In Sri Lanka, the short-run causality flows from remittances to GDP per capita and vice-versa. This study further observes excessive consumption and investment in unproductive sectors of transferred money result in a negative correlation with economic development. This study analyzes both the impact of remittances on economic development from an aggregate perspective and from a country-by-country perspective, unlike previous studies that only considered an aggregate perspective. Based on the findings and recommendations of this study, it is expected that policymakers will be able to use the remittances to accelerate economic growth in productive sectors.