Relationship between foreign debt, remittance inflows and economic growth in Nepal
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Department of Economics
Abstract
Nepal is considered as one of the highest remittance-receiving countries where the
inflow of remittance is more than 25 % of the total GDP. Previous researchers have
shown the mix results where some studies showed a positive impact whereas some
showed a negative impact of remittance on the GDP. Therefore, this study has been
conducted to examine the long-term relationship between remittance, exports, foreign
debt, inflation, and labor force participation with GDP. The data for the study was
collected for the period 1993-2019 from various sources. The data were analysed
using various analytical techniques such as Johansen- co-integration test, VECM
model, correlation, and regression analysis. The findings from the study suggested
that there exists long term relationship between GDP with remittance inflow, foreign
debt, exports, inflation, and labor force participation. The individual co-integration
also indicates that GDP and these variables have a long-term relationship except the
relationship between inflation and GDP. Furthermore, the findings from the
regression analysis suggested that remittance inflow, exports, inflation, and foreign
debt have a negative impact on economic growth. Based on the findings it is
recommended that the remittance-led growth should be closely monitored and the
investment of the remittance on the productive sector should be promoted rather than
only spending on consumption. Keywords: Economic growth, Remittance inflow,
Foreign Debts, Johansen Co-integration and Regression