Workers’ Remittances and Domestic Investment in South Asia: A Comparative Econometric Inquiry

This study explores the effect of workers’ remittances on domestic investment in four selected South Asian countries: Bangladesh, India, Pakistan, and Sri Lanka, using contemporary time series estimation techniques from 1980 to 2017. The estimated results of the ARDL bounds approach to cointegration analysis have revealed that among selected South Asian countries, Pakistan has witnessed a significant negative effect in the long run. Similarly, the findings of other forms of capital flows also revealed varying effects across the countries considered. This study urges the transformation of aggregate economic behaviour from consumption to the production side, by adopting policies that would encourage domestic saving and investment activities. In this regard, among others, reduction in the interest rate and the interest rate spread would be beneficial. It urges the identification of factors that conditions varying effect of workers’ remittances and other capital inflows to mitigate negative effects into positive.