An Empirical Study of the Determinants of Remittances in Transitional Economies
Keywords:Remittances; Transitional Economies; Panel Data
The paper investigated the determinants of remittances in transitional economies using panel
data (1997 – 2014) with econometric estimation techniques such as fixed effects, random effects and
the pooled OLS. The study found out that FDI and economic growth had a significant negative influence
on remittances across all the three econometric estimation methods. Financial development and savings
had a significant positive effect on remittances under the fixed and random effects and a significant
negative impact on remittances under the pooled OLS approach. Another variable that was also found
to have had a significant positive impact on remittances under both the fixed and random effects is
inflation, consistent with available theoretical underpinnings. In summary, variables that were found to
have a significant influence on remittances include FDI, economic growth, inflation, financial
development and savings. Across all the three econometric estimation methods, human capital
development and trade openness were found not to have any significant influence on remittances, a
finding which contradicts available theoretical and empirical literature.
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