Presented By Presented By A.N.M. Ferdous Alam
Agenda of Presentation � Preamble � Objectives � Data and Methodology � Results and Discussion � Conclusion and Recommendations
Objective of the Study To contribute to the weak and recent literature on 1) macroeconomic impact of international migrants’ remittance on the economic growth of Bangladesh 2) To assess the magnitude of remittances relative to 2) To assess the magnitude of remittances relative to key macro-economic variables such as gross domestic product, private investment and human capital development 3) To suggest suitable policy recommendations for the macroeconomic development of with a view to smooth transaction of remittances in Bangladesh. 3
International migration and Remittances: Stylized Facts � Only 3% of world population are international migrants � In 2008 highest 875,055 number people migrated from Bangladesh keeping yearly average flow of more than 200,000 workers. than 200,000 workers. � Migration benefits all parties – the migrants, the destination country, and the origin country. � Migration generates substantial welfare gains and reduces poverty mostly through remittances, and also through trade, investments, and transfer of knowledge, skill and technology
Total number of International Migrant Workers from Bangladesh, 1976-2009 5
Source: BMET (2011) 6
Remittances Inflows to Bangladesh (current $m), 1976-2010 12000 Remittances Inflows 10000 $mn(current) 8000 6000 4000 $m 2000 0 Year Between 1976 and 2010 remittance flows grew from $18.76 million to a substantial $10.85 billion in 2010, equivalent to 10.81 percent of GDP 7
World Top Ten Remittance Recipients in 2010 (US$ Bn) Nigeria 10.05 Belgium 10.06 Spain 10.5 Bangladesh Bangladesh 11.1 11.1 Germany 11.2 France 15.3 Philippines 21.3 Mexico 21.9 China 51.3 India 53.1 Source: World Bank Data, 2011 8
International migrants’ Remittances and Other Inflows to developing countries 700 FDI Remittances 600 ODA Private debt and portfolio equity 500 llion US$ 400 Billio 300 200 100 0 1995 2000 2004 2005 2006 2007 2008 2009 1010e Source: Migration and Remittance Fact book, 2011 Remittances flows to Developing countries remains resilient during crisis 9
Remittance, Foreign Aid and Foreign Direct Investment: A comparison of major capital cash flow in Bangladesh 14.00 FDI to GDP 12.00 ODA to GDP Remittances to GDP 10.00 8.00 DP % of GD 6.00 4.00 2.00 - -2.00 Source World Bank (2011) 10
Data and Methodology Mainly secondary time series data Data collected for period from 1976 to 2010 from World Bank, IMF, OECD and the Bangladesh Bureau of Statistics and Bangladesh Bank. Data analyzed by STATA Software Data analyzed by STATA Software Multivariate time series Analysis � Prais-Winsten Regression Approach � Y i = β 1 + β 2 X 2i + β 3 X 3i + ……. + β n X ni + u i where Y i , X 2i, X 3i ..... X ni are the variables and β 1 , β 2, β 3 .....β n are coefficient to be estimated and u i is an error term Variable Used: GDP, Investment, Human Capital and Remittances 11
Data and Methodology Test Used in the Study Unit Root Test (Co integration test) Stationary (mean, covariance, autocorrelation, etc. are all constant over time) by ADF test : The residual series has a unit root (variables : The residual series has a unit root (variables � H � H 0 are not co-integrated) : The residual series has no unit root (variables � H A are co-integrated) Causality test (Engle-Granger Approach) � to estimate the appearance and direction of relationship between the variables. 12
Results and Discussions Unit Root Test (Co-integration Test) � Unit root test based on the ADF approach was conducted from a constant and a trend and all the variables are integrated to order one I(1). � Autocorrelation exits at the significance level 5% and � Autocorrelation exits at the significance level 5% and 1% respectively but require 10% significance level using the LM test to remove autocorrelation � First differences of the times series give results that are not spurious. � Null hypothesis is rejected and it means that variables are co integrated to each other 13
Results and Discussions Contd… Prais-Winsten Co- integration Approach LGDP = 12.87072 + 0.1214513*LREM + µ t t-value 3.62 LINV = 5.280738 + 0.1722585*LREM + µ t LINV = 5.280738 + 0.1722585*LREM + µ t t-value 11.07 HC = -3.149068+ 0.4931184*LREM + µ t t-value 2.43 Positive adjusted constant values implies remittance and private investments while GDP and investments are co-integrated Remittances at the 1- percent significant level have immediate effect on GDP while the human capital variable the significance is somewhat lower means that negative constant indicates more of a long run impact on human capital. 14
Results and Discussions Contd… Multivariate Co-integration Analysis Prais-Winsten Regression Approach LGDP = 12.08284 + 0.1052274* LINV + 0.4188799 * LHC + µ t t- value 2.10 3.02 t- value 2.10 3.02 A positive relationship between GDP and private investment and average year of schooling. Thus a 1% increase in the domestic investment will increase GDP by 0.11%. Similarly a 1% increase in the average year of education will increase growth by 0.42%. Impact of human capital on growth is approximately four times higher as compared to investments. 15
Results and Discussions Contd… Granger Causality test for sustainability Significance level used is 5%. Two stars (**) and one star (*) mean significant at 5% and 10% respectively GDP growth is predictable through remittance in lag level two as well. 16
Conclusions � Remittances have stronger impact on human capital and influence sustainable growth. � Impact of investments is considerably lower as compared to human capital. � Remittances will affect labour and firm productivity � Remittances will affect labour and firm productivity through interactions and spillovers. � Policy incentives for accelerating and channeling the remittance inflow by the Central Bank and the Government of Bangladesh � Wage Earners’ Development Bond, US$ Premium Bond, NFCD A/C, NRTA A/C , 10% quota in IPO, DA with Foreign Banks and Exchange Houses, Remitting beneficiary's a/c by 3 days.
Policy Recommendations Programs to use human resources on dynamic sector � Generate a more knowledge-based economy and create new business opportunities though various spillover effects spillover effects Speeding-up comprehensive education system � Market oriented vocational skills, compatible education system and Creativity Reducing cost of Remittance Prudential Banking regulations and channelizing the remittances: 18
Policy Recommendations Contd… Gender Issues Empowering women in the workforce increasing their capacity for female migration Regulation and Enforcement To curtail the amount of undocumented migration, Persistent vigilance against human trafficking through coherent and strictly enforced law 19
Many thanks Many thanks 20
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