Impact of remittance inflows on Nepal’s economy

Abstract

The study investigates how remittance inflows, funds transferred from abroad, impact the economic growth of Nepal, a developing nation where such inflows play a crucial role. The primary objective was to analyze remittances' effect on Nepal's economy while describing the situation of remittance inflows and real GDP growth from 2002/03 to 2021/22. Utilizing secondary data, the research employed descriptive and causal relationship designs. Descriptive, correlation, and regression analyses were conducted to obtain relevant results aligned with the objectives. Correlation analysis revealed a significant relationship between economic growth and remittances, money supply, capital formation, and foreign direct investment (FDI) in Nepal. Regression analysis demonstrated a positive, significant link between economic growth and remittance inflows. The regression model accounted for 98.4% of variation in economic growth. The study concludes that remittance inflow is a major contributor to Nepal's economic growth. It recommends policymakers prioritize remittance inflows and their productive utilization within the economy. Channeling remittances into productive sectors could boost growth. Further investigation into remittances' impact on Nepal's economy is suggested to build on these findings.

Key Words: Real Gross Domestic Product, Remittance Inflow, Money Supply, Capital Formation, Foreign Direct Investment