The Impact of Foreign Remittances on Economic Growth: Evidence from Zimbabwe
Keywords:Diaspora Remittance; Personal Remittance; Foreign Remittance; Economic Growth; Gross Domestic Product
Purpose – This article examined the impact of foreign remittances on economic growth in Zimbabwe. Approach – Secondary data collected from the World Bank`s World Development Indicators database, was employed to empirically examine the nature of the relationship between the two variables, for the period 1960-2020. The autoregressive distributed lag model was used. Findings - The major findings reveal both unidirectional and bi-directional causality linkages between foreign remittances and economic growth during the three periods under review. Foreign remittances showed a positive and significant influence on gross domestic product in Zimbabwe. The period before dollarization gave a strong negative influence on Zimbabwe’s economic growth. The dollarization period showed a strong positive correlation between the two variables under study in Zimbabwe. The error correction gave a very strong negative statistical relationship with the rate of economic growth in Zimbabwe. Practical implications – This article has practical implications especially for policy formulation and implementation at individual and government levels. Originality/value – The article closed the gap in knowledge by drawing attention to the nature of the relationship between foreign remittances and economic growth in Zimbabwe during the three different economic cycles examined.
Aggarwal, R. and Spatafora, N. (2005). “Workers’ Remittances and Economic Development,” In World’s Economic Outlook April 2005. Washington DC.: IMF.
Batool, Z., Haroon, M., Ali, S., and Ahmad, R. (2022). “Remittances and Economic Growth: Exploring the Role of Financial Development,” iRASD Journal of Management, Vol. 4(1), pp. 127 – 134. https://doi.org/10.52131/jom.2022.0401.0067.
Bracking, S. and Sachikonye, L. (2006). Remittances, poverty reduction and the informalisaiton of household well-being in Zimbabwe, Global Poverty Research Group, working paper no. 45.
Chami, R., Jahjah, S. and Fullenkamp, C, (2005). “Are Immigrant Remittance Flows a Source of Capital for Development?” IMF Staff Papers, Vol. 52(1), pp. 55–81.
Chetsanga, C. J. and Muchenje, T. (2003). An Analysis of the Cause and Effect of the Brain Drain in Zimbabwe. Harare: Scientific and Industrial Research and Development Centre.
Depken, C.A., II, Nikšic Radic, M. and Paleka, H. (2021). “Causality between Foreign Remittance and Economic Growth: Empirical Evidence from Croatia,” Sustainability, Vol. 13, pp. 1-13. https://doi.org/10.3390/su132112201.
Fayissa, B. and Nsiah, C. (2010). “The impact of remittances on economic growth and development in Africa,” The American Economist, Vol. 55(2), pp. 92–103.
Githiga, M. E. (2014). Impact of Remittances Inflows on Economic Growth in Kenya. Nairobi: University of Nairobi.
Giuliano, P. (2006). Remittances, Financial Development and Growth, Discussion Paper 2160, International Monetary Fund and IZA, Bonn Germany.
Giuliano, P. and Ruiz-Arranz, M. (2005). “Remittances, Financial Development, and Growth,” IMF Working Paper No. 234.
Giuliano, P. and Ruiz-Arranz, M. (2009). “Remittances, Financial Development, and Growth,” Journal of Development Economics, Vol. 90(1), pp. 144-152.
KNOMAD (2022). Remittances Data [Data file]. Retrieved from https://www.knomad.org/data/remittances.
Lacheheb, Z. and Ismail, N. W. (2020). “The Impact of Remittance on Economic Growth in Low and Middle income Countries,” International Journal of Academic Research in Economics & Management Sciences, Vol. 9(2), pp. 61-70.
Maimbo, S. M. and Ratha, D. (Eds.). (2005). Remittances: Development Impact and Future Prospects. Washington DC: World Bank.
Maphosa, F. (2004). The Impact of Remittances from Zimbabweans working in South Africa on Rural Livelihoods in the Southern Districts of Zimbabwe. A summary of a report submitted to The Council for the Development of Social Science Research in Africa (CODESRIA).
Maphosa, F. (2007). “Remittances and development: The impact of migration to South Africa on rural livelihoods in southern Zimbabwe,” Development Southern Africa, Vol. 24(1), pp. 123-135.
Maune, A. (2022a, February 11). Crowdfunding as Alternative finance for entrepreneurs. The Zimbabwe Independent. Retrieved from https://www.theindependent.co.zw.
Maune, A. (2022b, February 18). Donation-based crowdfunding. The Zimbabwe Independent. Retrieved from https://www.theindependent.co.zw.
Meyer, D. and Shera, A. (2017). “The impact of remittances on economic growth: An econometric model,” EconomiA, Vol. 18, pp. 147–155. http://dx.doi.org/10.1016/j.econ.2016.06.001.
Meyer, D. and Shera, A. (2016). “The Impact of Remittances on Economic Growth: An Econometric Model,” Journal of Applied Economics, Vol. 3(4), pp. 233-235.
Mugano, G. (2016). Zimbabwean Diaspora Remittances: Remittances a key Source of Finance in Developing Countries. Harare: Mambo.
Muponda, G. (2009). Tapping Diaspora capital to kick-start Zimbabwean economy. GMRI Capital. http/www.gmricapital.com.
Nsiah, C. and Fayissa, B. (2013). “Remittances and economic growth in Africa, Asia, and Latin American-Caribbean countries: A panel unit root and panel cointegration analysis,” Journal of Economics and Finance, Vol. 37(3), pp. 424–441.
Ratha, D. (2013). Economic Implications of Remittances and Migration. Washington, DC: World Bank.
Rodrik, D. (2000). “Saving transitions,” The World Bank Economic Review, Vol. 14(3), pp. 481-507.
Saad, A. (2015). The impact of Remittances on Key Macroeconomics Factors. Palestine: Palastine Research Institute, Mars Pub.
Singh, R. J., Haacker, M., Lee, K. W., and Le Goff, M. (2011). “Determinants and macroeconomic impact of remittances in Sub-Saharan Africa,” Journal of African Economies, Vol. 20(2), pp. 312-340.
Sutradhar, S. R. (2020). “The impact of remittances on economic growth in Bangladesh, India, Pakistan and Sri Lanka,” International Journal of Economic Policy Studies, Vol. 14, pp. 275–295. https://doi.org/10.1007/s42495-020-00034-1.
Srivastava, P. and Chandhary, A. (2007). The Impact of Remittances on the Economic Development of Developing Countries. Cape Town: South Africa (OSISA).
Tambama J. (2011). The Impact of Remittances on Zimbabwean Economic Development. Harare: Department of Economics, University of Zimbabwe.
UNDP (2010). The Potential Contribution of the Zimbabwe Diaspora to Economic Recovery, Working Paper No. 11 of the Comprehensive Economic Recovery in Zimbabwe Working paper series, UNDP, Harare.
Woodruff, C. and Zenteno, R. (2007). “Migration networks and microenterprises in Mexico,” Journal of Development Economics, Vol. 82(2), pp. 509-528.
World Bank`s (2022). World Development Indicators [Data file]. Washington DC: World Bank.
Yang, D. (2008). “Coping with disaster: The impact of hurricanes on international financial flows, 1970-2002,” The B.E. Journal of Economic Analysis and Policy, Vol. 8(1), pp. 1-45.
Yaseen, H. (2012). The Positive and Negative Impact of Remittances on Economic Growth in MENA Countries. Cape Town, S.A.
How to Cite
Copyright (c) 2022 Alexander Maune, Ephraim Matanda
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
The author fully assumes the content originality and the holograph signature makes him responsible in case of trial.