Causal Nexus Between Remittance Inflow And Its Determinants, 1998-2020: Evidence From The South And Southeast Asian Lmics

Abstract

This paper aims to explore the key macroeconomic determinants that influence remittance inflows to the 12 lower-middle-income countries (LMICs) in South and Southeast Asia. The study employs panel data methods such as fixed and random effects and Kao test of cointegration over the period 1998-2020 using secondary data. The findings indicate that factors such as financial development, migrant stock, and GDP per capita of the host country and home countries positively affect the remittance inflows. However, the average cost of remittances, age dependency ratios, inflation rate, real interest rate and political stability are negatively associated with remittances. The LMICs in South and Southeast Asia are amongst the least expensive remittance corridors, and enhancing remittance inflows to these economies can go a long way in aiding development and helping these economies transition to a higher income category. In this context, we argue that efficient and accelerating financial development is likely to enhance the remittance inflows to the LMICs.