COMPARATIVE ANALYSES OF AGGREGATE AND COUNTRY-SPECIFIC REMITTANCE INFLOWS ON PAKISTAN'S ECONOMIC GROWTH

Abstract

This research empirically examines the impact of aggregate and country-specific remittances from Saudi Arabia (KSA), the UAE, the UK, and the USA on Pakistan's economic growth during 1991-2023, using annual time-series data. This study uses an Autoregressive Distributed Lag (ARDL) bounds testing approach and finds that all five models are cointegrated, with an adverse and statistically significant error-correction term, indicating adjustment toward long-run equilibrium. For many Pakistanis abroad, remittances from these countries are a significant source of income. They make a substantial contribution to Pakistan's external sector, but their contribution differs among the recipient countries; therefore, it is necessary to analyze them separately. In all the models, remittances are found to have a substantial effect on the Pakistani economy. Remittances from KSA have the highest impact on GDP growth, followed by remittances from the UK, the USA, and the UAE. Aggregate remittance inflows positively affect economic growth. Labor force, industry, and final consumption expenditure have positive and significant long-run growth effects. At the same time, manufacturing, exports, and trade have negative coefficients, implying a mild Dutch disease. The study recommends that Pakistan develop bilateral labor and investment agreements with high-income countries and direct remittances toward factor accumulation to achieve the maximum economic growth effect.
JEL Classification: F24, O47, C22