Remittances Impact on Economic Growth, Domestic Savings and Domestic Capital at the Presence of ODA and FDI in selected MENA Countries

Abstract

This article investigates the impact of remittances on economic growth, investment and domestic savings in selected MENA labor exporting countries. The estimations have been done in the presence of other international capital inflow, which are foreign aid and foreign direct investment. A multiple equations model estimated simultaneously using different techniques. We found a positive impact of remittances on both growth and investment, meanwhile a negative impact on domestic savings. Aid impacts negatively on both growth and savings where it finance consumption instead of investment and enhance rent seeking behavior. Government expenditure and FDI are important source of growth. We recommended that policies for encouraging final use of productive investment of remittances. In addition, enhancing more project of migrant in home country that may facilitate their trade with host countries. Finally, more efficient allocation of aid is requires, and attracting more FDI.

Nexus between foreign direct investment, foreign aid, foreign remittance and economic growth in Bangladesh: Analysis of association

“…Beside this, this study also claims that the cause behind this happening is that remittance is in itself not adequate for growth, the benefits of the remittance are depended on the macroeconomic environment and the quality of the domestic institution of the remittance receiving country (Dastidar, 2017).The investigation in MENA countries with data from 1980 to 2009 claimed influences of remittance indicates that the remittance stimulates the economic growth when the remittance is invested and it also contributes to growth by boosting the accumulation of human capital (Mim & Ali, 2012). A study of 8 labor-exporting MENA countries claimed influence of remittance is positive with investment and negative with saving at domestic level (Sabra, 2016). A negative relation between economic progress and remittance is also found in a study based on panel data of 113 countries for a period of 30 years (Chami, Fullenkamp & Jahjah, 2005).…”