Exploring the Determinants of Worker’s Remittances: An Application of Encompassing and LASSO Technique

This study seeks to identify the potential determinants of workers’ remittances from the existing models of workers’ remittances of Pakistan by using encompassing and LASSO techniques. The annual time series data are collected for the period 1975-2017. In this study we have considered the determinants of workers’ remittances provided by the five models in case of Pakistan along with black market premiums(BMP) and wage rate(W) from international literature. After finding the appropriate model by encompassing and LASSO techniques, general to specific(G2S) methodology is used to find the parsimonious model which are and . Then we have chosen the final model for workers’ remittances by ranking both models according to their standard errors. It has been observed that has the minimum standard error and has encompassed . Therefore, is considered as final model for workers’ remittances in Pakistan. ARDL bound test has been applied to find the long run conintegrating relationships among the determinants of workers’ remittances. The results of final model suggest that the major determinants of workers’ remittances are internal and external conflicts, major agriculture crops and investment return of Pakistan and real effective exchange rate. In the long run the internal conflicts and investment return of Pakistan have negative and significant, whereas, the real effective exchange rate, external conflicts and major agricultural crops have positive and significant impact on workers’ remittances of Pakistan. While in the short run internal conflicts has negative and significant whereas external conflicts has positive and significant impact on workers’ remittances of Pakistan. Therefore, it is necessary to reduce the internal conflicts to enhance the workers’ remittances in the country. Supervisor: Dr. Hafsa Hina Co-Supervisor: Dr. Amena Urooj

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Author: Fareed Ullah
Supervisor: Hafsa Hina

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