Role of Remittances in Consumption Smoothing: The Case Study of South Asia
Author: Mohsin Rasheed

This study examines the impact of remittances on household consumption smoothing in South Asia region. Consumption smoothing is analyzed by employing Common Correlated Effect Mean Group (CCEMG) over period of 1980 to 2017 for substantially larger group of countries. The Common Correlated Effect Mean Group technique incorporates the problem of structural breaks and cross sectional dependence. Traditional techniques like Fixed effect method and Random effect method as well as Generalized movement method do not incorporate the problem of structural breaks and cross sectional independence and were considering the homogeneous slope for whole panel data. This study also examined the role of several other socio-economic variables like judicial system, governance, globalization and financial development to be scrutinized in the consumption smoothing framework. There are two major finding of this paper. First, this study confirms the consumption smoothing via remittances. Secondly, the coefficient of per capita income is found to be deteriorating by improving the governance, globalization and financial development indicators. The contribution of remittances in consumption smoothing is higher than other socio-economic variables like globalization, governance and financial development. However, our main objective is confirmed in this study that remittances ultimately enhance the consumption smoothing. By improving the flow and channel of remittances, the consumption may smooth. Some policy recommendations are being suggested based on empirical and theoretical findings. People will send more remittances to home countries if macroeconomic conditions are good enough. High black market premiums, adverse exchange rates and inflation adversely affect the flow of remittances. Supervisor:- Dr Nazia Bibi

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Keywords : CCEMG, Consumption Smoothing, Financial Development, GOVERNANCE, REMITTANCES
Supervisor: Nazia Bibi

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