Macroeconomic Determinants of Remittances in South Asian countries: A Dynamic Panel Study

The study attempts to identify the macroeconomic determinants of remittance inflows in South Asian countries. It uses additively separable utility function as theoretical framework and the Arellano-Bover/Blundell-Bond Systems of Generalized Method of Moments (SGMM) method as empirical framework. We use data on five countries in South Asia over the period 1976-2012. Results indicate that the remittance inflows in South Asia are altruistically motivated by the economic condition of home country whereas they are motivated by self-interest in case of the host country’s economic condition. The emigrant stocks abroad, financial development and political rights significantly and positively affect the remittance inflows. The impact of 9/11, 2001 on remittance inflows is also found significantly positive. This is probably as a result of receiving more remittances through formal channel instead of informal channel due to strict monetary regulation. The study implies that well managed financial, political and macroeconomic environment and pro- growth policy formulation are crucial to attract more remittances in this region.