A.N.M. Ferdous Alam Agenda of Presentation Preamble Objectives - - PowerPoint PPT Presentation

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

1)

To contribute to the weak and recent literature on 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

• f

knowledge, skill and technology

Total number of International Migrant Workers from Bangladesh, 1976-2009

5

6

Source: BMET (2011)

4000 6000 8000 10000 12000

$mn(current)

Remittances Inflows to Bangladesh (current $m), 1976-2010

Remittances Inflows

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2000

$m 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

Bangladesh Spain Belgium Nigeria

11.1 10.5 10.06 10.05

World Top Ten Remittance Recipients in 2010 (US$ Bn)

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India China Mexico Philippines France Germany Bangladesh

53.1 51.3 21.9 21.3 15.3 11.2 11.1

Source: World Bank Data, 2011

400 500 600 700 llion US$

FDI Remittances ODA Private debt and portfolio equity

International migrants’ Remittances and Other Inflows to developing countries

Source: Migration and Remittance Fact book, 2011

Remittances flows to Developing countries remains resilient during crisis

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100 200 300 1995 2000 2004 2005 2006 2007 2008 2009 1010e Billio

Remittance, Foreign Aid and Foreign Direct Investment: A comparison of major capital cash flow in Bangladesh

8.00 10.00 12.00 14.00

DP

FDI to GDP ODA to GDP Remittances to GDP 10

• 2.00
• 2.00

4.00 6.00

% of GD

Source World Bank (2011)

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

Yi= β1 + β2X2i + β3X3i + ……. + βnXni + ui

where Yi, X2i, X3i ..... Xni are the variables and β1, β2, β3.....βn are coefficient to be estimated and ui is an error term Variable Used: GDP, Investment, Human Capital and Remittances

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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

H

: The residual series has a unit root (variables

H0

: The residual series has a unit root (variables

are not co-integrated)

HA

: The residual series has no unit root (variables

are co-integrated) Causality test (Engle-Granger Approach)

to

estimate the appearance and direction

• f

relationship between the variables.

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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

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Results and Discussions Contd… Prais-Winsten Co- integration Approach

LGDP = 12.87072 + 0.1214513*LREM + µt

t-value 3.62

LINV = 5.280738 + 0.1722585*LREM + µt LINV = 5.280738 + 0.1722585*LREM + µt

t-value 11.07

HC = -3.149068+ 0.4931184*LREM + µt

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.

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Results and Discussions Contd… Multivariate Co-integration Analysis Prais-Winsten Regression Approach

LGDP = 12.08284 + 0.1052274* LINV + 0.4188799 * LHC + µt 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.

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Results and Discussions Contd…

Granger Causality test for sustainability

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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.

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

• riented

vocational skills, compatible education system and Creativity Reducing cost of Remittance Prudential Banking regulations and channelizing the remittances:

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Gender Issues Empowering women in the workforce increasing their capacity for female migration

Policy Recommendations Contd…

Regulation and Enforcement To curtail the amount of undocumented migration, Persistent vigilance against human trafficking through coherent and strictly enforced law

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Many thanks Many thanks

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