All Theses and Dissertations

Degree

Master of Science in Economics

Faculty / School

Faculty of Business Administration (FBA)

Department

Department of Economics

Date of Award

Fall 2013

Advisor

Dr. Mohammad Nishat

Committee Member 1

Dr. Mohammad Nishat, Institute of Business Administration, Karachi

Project Type

Thesis

Access Type

Restricted Access

Pages

xii, 125

Abstract

Remittances are playing vital role in strengthening Balances of Payment of Pakistan and consequently foreign exchange reserves. This macroeconomic phenomenon has been recognized unanimously that voting power to overseas Pakistani is being awarded along with possible quota in legislative houses. Macroeconomic determinants of remittances in Pakistan are explored in this study covering the period from FY 1975 to FY2011. Findings of Ordinary Least Square (OLS) verifies outcome of Vector Error Correction Models (VECM) that major determinants are Real GDP and per capita income of home and host countries, number of migrants going abroad, exchange rate, national saving rate and natural disasters are important determinants of remittances. These determinates have almost same impact to per worker remittances as response variable. In case of any shock to remittances, it will adjust to its equilibrium in almost 11 years. Foreign GDP as economic indicator of the host countries in this study suggests that there are indications of investment of migrants in host countries. It also explore investment motive of migrants in Pakistan. Inverse relationship with exchange rate and saving rates points towards mixed motives of exchange and loan repayments. This research uses weighted average indicators of economic conditions i.e. real GDP and per capita income of host countries instead of taking simple average of major host countries. This research contributes towards estimation of insurance motive of remittances towards Pakistan using natural disasters as proxy suggesting approximately 25 percent of the remittances will be increased if last year disaster(s) was/were observed. When Pak Rupee depreciates quickly, it is recommended that government should take proactive measures to channelize remittances from black market premium to official channel due to increased premium. Since this study finds out indications of investment by migrants especially in host countries leading to self-interest motive of migrants, suggesting to introduce investment avenues for overseas Pakistanis especially in a proactive manner when economic conditions of the host courtiers deteriorates.

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