THE ROLE OF REMITTANCES IN PAKISTAN ECONOMIC GROWTH AND FINANCAIL STABILITY

Abstract

This research study performed to empirically examine the role of worker remittances in determination of economic growth and financial stability in case of Pakistan. The study selected GDP growth rate and financial stability as dependent variables while personal/ worker remittance as independent variable. The study took data on annual basis. The study followed with the quantitative approach and developed research questions that lead toward research hypotheses. The current study selected with the annual data from 1985 to 2024. The current research study applied the data with the time series regression model using E-view as software. The results of the study revealed that there is a significant impact of personal remittance on GDP growth rate with coefficient value of -1.2955 along with significance value of 0.0003. This clearly shows that for every unit increase in personal remittances there is a decrease of GDP growth rate approximately by 1.30 units keeping all other factors constant. The study also revealed that there is a significant impact of lag of personal remittance on GDP growth rate with coefficient value of 1.3617 along with significance value of 0.0002. The positive relationship and significant impact of lag of personal remittances on GDP growth suggests that remittance inflows contribute to economic growth over time instead of its immediate impact. Similarly, the study also revealed that there is a significant impact of personal remittances on net foreign assets with significance value of 0.0043 along with coefficient value of 1.9054. This positive association of personal remittances and net foreign assets (NFA) translates with the role of remittance inflows in strengthening a country's external financial position like for Pakistan. The study also found that lag of the personal remittances has significant impact on the net foreign assets with coefficient value of -2.37938. This shows that lag of the personal remittances significantly determines net foreign assets in case of Pakistan. The negative relationship of lagged personal remittances on net foreign assets explains that remittances initially boost external reserves.