Remittances and Economic Growth: Evidence from Ethiopia, Kenya, and Uganda

Abstract

The purpose of this study is to analyze the possible effect of international remittances
on the economic growth in three selected economies of Intergovernmental Authority
on Development (IGAD) member countries, namely, Ethiopia, Kenya, and Uganda.
Remittance inflows have emerged as a key link between human mobility and
development. However, empirical findings on the nexus between remittances and
economic growth are either conflicting or at most mixed. This paper explores the
effects of remittances from international migration inflows on the economic growth of
three IGAD member countries. The study uses quantitative analysis that encompasses
the above-mentioned countries using the World Bank’s annual data from 1990 to 2017.
The novelty of this study is that it uses different approaches to solicit the short-run
and the long-run nexus between economic growth and remittance flow. The pooled
estimation result from fully modified least squares (FMOLS) shows that the logarithm
of remittances impacts the dependent variable, economic growth, positively but not
statistically significant. The Kao panel residual cointegration test shows that the null
hypothesis is not sufficiently supported by the data. There is a statistically significant
long-run relationship between the variables in the series.