ECONOMIC DETERMINANTS OF INTERNATIONAL REMITTANCES IN PAKISTAN

Abstract

The international remittance is one of the important sources of foreign exchange earnings in the country. Recently, Pakistan received over $4 billion as foreign remittances in 2006. The flows of funds through foreign remittances served as a cushion for balance of payment and foreign reserves. The economic determinants of international workers’ remittances and migration in Pakistan were investigated in this research study. The time series data were used to identify the economic determinants of the international remittances and migration in Pakistan for the year of 1973 through 2005. The stationary properties of each time series were investigated and found integrated of order one. The variables of remittances and migration models were established as co-integrated. The real remittances in Pakistan were found positively related with real GDP, real Growth rate and unemployment rate and were negatively related with real wage rate, literacy rate and spread rate of banks in Pakistan. The migration from Pakistan was found positively related with real remittances, inflation and unemployment rate and was negatively related with real wage rate in the country. Based on research results, it seems imperative to introduce financial innovations and create friendly environment for migrant workers to invest in the country. The widening gap of saving-investment can also be bridged through providing incentives on the bank rate and saving schemes.