The Effect of Diaspora Remittances on Economic Growth: The Case of Rwanda
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Date
2019-10
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Addis Ababa University
Abstract
Remittances sent to the sub-Saharan region are amongst the highest recorded, which amounted
for more than the total foreign direct investment flow and foreign aid in 2013. They are also
believed to increase domestic investment, which in turn increases the macroeconomic stability
of a country’s economy. With the general objective of investigating the effect of diaspora
remittances on economic growth in Rwanda, this study used a time series data from World Bank
Development Indicators which spans from 1990 to 2017 and applied an auto regressive
distributed lag (ARDL) approach. The outcome of the study revealed that, the long run growth
impact of remittances is positive and significant for the study period. This was also backed with
a positive and significant short run multiplier effect, which portrays remittances as a driver for
economic growth. Moreover, the Stability test has confirmed that the established positive
relationship of remittances and economic growth is stable and can fairly be used for forecast.
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Keywords
Remittances, Economic Growth, ARDL, Rwanda