The impact of remittances on economic growth: evidence from selected ASEAN developing countries

Abstract

Over the last decades, remittances have been regarded as one of the important sources of financial flows to developing countries. Nevertheless, whether remittance serves economic growth or not is so far still a key empirical question. This paper attempts to examine this issue. In particular, the investigation covers seven Asean developing countries over the period of 2000 to 2011. A logistic regression technique is employed to evaluate the impact of remittances on economic growth. To account for the inherent endogeneities in the relationship between remittances and economic growth, a Generalized Method of Moments (GMM) approach is used. The regression results of the study show that, at best, remittances should not be treated as a source of capital flows and have a negative impact on economic growth because they are used for bad economic performance of the recipients. This suggests that policy makers should have the recipients to allocate large amount of remittances in investment as contribution to economic growth.