Do Remittances Promote or Constrain Growth? Evidence from South Asian Economies

Abstract

This study examines the remittance–growth nexus in Pakistan, India, Bangladesh, and Sri Lanka over 1980–2015 using a panel ARDL model with Pooled Mean Group (PMG) estimation. The approach captures both short-run dynamics and long-run relationships while allowing for cross-country heterogeneity. Results indicate that a 1% increase in remittances is associated with a 1.38% decline in long-run GDP growth. Dumitrescu–Hurlin tests show no bidirectional Granger causality, suggesting remittances operate largely outside the productive economy. In contrast, foreign direct investment and exports have positive and significant long-run effects. Short-run impacts are heterogeneous—positive in Pakistan, negative in Bangladesh, and insignificant in India and Sri Lanka. Overall, the findings support dependency and Dutch disease perspectives, highlighting the need to channel remittances toward productive investment through financial and institutional reforms.

Keywords:

Remittances; Economic Growth; South Asia; Panel ARDL; Pooled Mean Group; Dutch Disease