ROLE OF ECONOMIC GROWTH AND FDI ON REMITTANCE INFLOWS IN BANGLADESH

다국어 초록 (Multilingual Abstract)

People who work outside of Bangladesh give money back to the country, which helps the economy grow. Money sent back to family and friends has been a significant contributor to economic growth and security over the past few decades. They help families spend more, escape poverty, and weather bad economic times. This study is mostly about how remittances or money sent back to family and friends impact the economy, especially how FDI and economic growth impact these remittances. To examine the influence of other variables on remittance inflows (REM), this study prioritised the role of economic growth (EG), exports (EX), and FDI inflows in Bangladesh, using an annual dataset from 1980 to 2022, a 43-year balanced time series after natural logarithmic transformation. This study employed contemporary time series methods, including unit root test of Augmented Dickey-Fuller (ADF), Phillips-Perron (PP), Kwiatkowski- Phillips-Schmidt-Shin (KPSS) tests to determine if the factors are stationary. Afterwards, to determine long-run equilibrium, it employed Johansen’s cointegration test to examine how the factors had changed over time. Two long- run linear relationships were observed while running this model. The research also looks at the Granger causality test, the VAR-ECM, the Impulse Response Function (IRF), and Variance Decomposition (VD). The numbers indicate that remittances to Bangladesh increase more frequently and significantly as the economy expands. People who work abroad are more likely to send more money back to their home country when their home country’s economy grows. This is likely because they have more investment options and feel more secure with their money. There is considerable evidence that refugees are more likely to contribute to the economy when economic conditions are favourable. They spend and invest money to do this. However, it’s not as easy to see how payments and foreign direct investment are connected. It was discovered that FDI can harm the amount of money sent back to family and friends. This could mean that FDI has an effect called “crowding out.” If a country receives more FDI, its citizens may not need to send money back to their home country. Sending money back to Bangladesh has been a significant contributor to its economic growth, particularly in reducing poverty and helping families make ends meet. A new study, however, reveals that other economic factors, such as FDI, are now more significant. FDI and remittances sent back to a country may both contribute to economic growth in different ways, but they may ultimately aim to achieve the same goal. FDI raises GDP over time by improving facilities, adding jobs, and sharing technology. Conversely, remittances only change how much families spend and invest for a short time. The VAR-ECM shows that these factors will be balanced in the long run. FDI is mostly bad for remittances in the long term. Economic growth and trade are good for them. According to the Granger correlation test, there is a two-way link between economic growth and money sent back to family and friends. The intricate relationships between economic growth, FDI, and remittance inflows in Bangladesh reveal how these factors affect the country’s economy.Remittance is Bangladesh’s largest foreign money source that supports household consumption, living conditions, and poverty reduction. However, economic growth, FDI, and remittance inflows have complex linkages that present policymakers with distinct problems and opportunities. The research shows that Bangladeshi economic growth and remittance inflows are positively correlated. Strong economic growth often leads to improved financial systems, increased investment options, and enhanced infrastructure, enabling migrants to invest their remittances in real estate, small businesses, or family education. First, remittance inflows depend on economic growth policies. These measures could enhance the banking sector to facilitate remittances, promote FDI- attracting sectors, and support stable, locally job-generating businesses. Second, the government should formalize remittance routes and promote constructive investments. This can be achieved by offering tax incentives for agriculture, education, and small business investment. The study suggests that Bangladesh’s government should keep pushing for steps to improve the economy, as these help send money back home. Additionally, the government should find a way to combine the benefits of FDI with the need to maintain high spending levels, particularly in rural areas. This is because FDI is crucial for a country's infrastructure and businesses to grow. Remittances are good for economic growth. To make them even better, there should be programs that formalise the ways people send money, simplify access to financial services, and encourage people to invest in opportunities that generate returns. It highlights the complexity of the relationship between remittances and FDI, emphasising the importance of economic growth to sustain remittance inflows. To find out more about the reasons people send money home, future studies could examine how inflation, population changes, and exchange rates affect money flow.

목차 (Table of Contents)

• ABSTRACT.I
• ACKNOWLEDGEMENTSV
• TABLE OF CONTENTS.VI
• LIST OF FIGURES..IX
• LIST OF TABLES.X
• I. INTRODUCTION. 1
• 1. Background. 1
• A. Statement of the Problem. 4
• B. Research Gap 5
• 2. Significance of the Study 7
• 3. Objectives of the Study 7
• 4. Outline of the Study 8
• II. LITERATURE REVIEW 11
• 1. Relevant Economic Theories 11
• A. Macroeconomic Theory 11
• B. Keynesian Theory 13
• 2. Conceptual Framework 15
• III. ECONOMIC CONDITIONS IN BANGLADESH 19
• 1. Major Macroeconomic Issues in Bangladesh 19
• A. Economic Growth 21
• B. Remittance Inflows. 25
• C. Foreign Direct Investment Inflows 28
• D. Export. 33
• 2. Current Economic Overview of Bangladesh. 35
• A. GDP Growth Rate in Bangladesh 36
• B. Inflation in Bangladesh 37
• C. Export in Bangladesh 37
• IV. ROLE OF EXPLANATORY VARIABLES ON REMITTANCE INFLOWS 39
• 1. Evidence showing the effect of explanatory variables on remittance 39
• A. Nexus of remittance and economic growth in Bangladesh 41
• B. Nexus of export and economic growth in Bangladesh. 42
• C. Nexus of FDI inflows and economic growth in Bangladesh. 44
• D. Nexus of other factors on economic growth in Bangladesh. 45
• 2. Hypothesis Testing. 49
• A. Influence of Economic Growth on Remittance Inflows. 49
• B. Influence of Export on Remittance Inflows 40
• C. Influence of FDI on Remittance Inflows 40
• V. PRELIMINARY DATA ANALYSIS. 54
• 1.Data Description. 54
• A. Graphical presentation. 54
• B. Descriptive Statistics. 55
• 2. Unit Root Test 57
• A. Augmented Dickey-Fuller (ADF) Test 57
• B. Phillips-Perron (PP) Test. 59
• C. Kwiatkowski-Phillips-Schmidt-shin (KPSS) Test 60
• 3. Correlation Analysis. 62
• 4. Granger Causality. 64
• 5. Johansen Cointegration test. 67
• 6. Lag Order Selection Criteria 68
• VI. EMPIRICAL ANALYSIS 74
• 1. Vector Autoregression (VAR) model. 74
• A. Impulse Response Function (IRF) of the VAR model 81
• B. Variance Decomposition in the VAR model. 84
• 2. Vector Error Correction Model (VAR-ECM) 87
• A. Impulse Response Function (IRF) of the VAR-ECM model. 95
• B. Variance Decomposition in the VAR-ECM model 96
• VII. CONCLUSION REMARKS 99
• 1.Conclusion 99
• 2. Policy Implications 102
• REFERENCES 104
• WEB SOURCES 115
• APPENDIX 116