Abstract
The workers’ remittances contribute the second largest share in the foreign exchange reserve in Pakistan which is facing chronic trade deficit. The purpose of the study is to explore economic determinants of remittances flow to Pakistan from 12 major markets. The data from 1990 to 2013 is taken from various national and international data sources. Panel fixed effect and random effect model is employed to explain the economic behavior of remittances inflow. The result of our regression model shows that the two variables, namely productivity growth of the recipient country and the level of income of originator country have positive effects on remittances, whereas, the distance between the two countries have significant negative. The results thus validate gravity model on migrant’s remittances to Pakistan. The real exchange rate shows significant positive, whereas the interest rate and unemployment level in remittance sending country have significant negative impact. The dummy variable for a common language and Gulf countries shows significant positive impact indicating the importance Gulf region for international migration and remittances to Pakistan. The policy implication of this study is that Pakistan should export remittances to countries with higher economic growth and lower interest rate and unemployment to enhance access to workers’ remittances. It should make its domestic environment investment friendly and adopt policies to encourage remittances for investment purpose.
Keyword(s)
International migration, remittances flows, Gravity Model, panel data