REMITTANCE FLOWS AND ECONOMIC EXPANSION IN ASIA’S DEVELOPING NATIONS: A PANEL DATA STUDY (1971–2020)

Abstract

This research explores the influence of remittance inflows on economic growth across 47 developing nations in Asia over the period 1971 to 2020, utilizing annual panel data from the World Bank. Through Fixed Effects and Random Effects modeling, the study assesses the relationship between remittances and GDP per capita growth. The findings indicate that both gross capital formation and economic openness are significant contributors to economic performance, with estimated coefficients of 0.3279 and 0.3268, respectively. Country-level analysis reveals diverse growth patterns: China and South Korea demonstrate sustained economic expansion with moderate remittance inflows, while Bhutan and Myanmar achieve notable growth despite limited remittance volumes, suggesting strategic utilization of external income. Vietnam shows a strong positive correlation between remittances and GDP growth, whereas India’s modest growth amid substantial remittance receipts points to underlying structural inefficiencies. The study categorizes countries into five regional groups, identifying South Asia, East Asia, and Southeast Asia as the leading recipients of remittances. Further classification by income level reveals that upper-middle-income economies gain the most when remittances are invested productively. High-income countries show limited growth impact due to consumption-oriented remittance use, while lower-middle-income nations face constraints from underdeveloped financial systems. Low-income countries experience minimal benefit due to low remittance volumes. These results highlight the importance of strengthening financial infrastructure, enhancing human capital, and implementing targeted policies to optimize the developmental potential of remittances. The study offers practical guidance for policymakers seeking to harness remittance flows as a driver of inclusive and sustained growth in Asia’s emerging economies.