On the causal nexus of remittances and poverty reduction in Bangladesh

• Published in: Applied economics Vol. 46; no. 4; pp. 374 - 382
• Main Authors: Hatemi-J, Abdulnasser, Uddin, Gazi Salah
• Format: Journal Article
• Language: English
• Published: London Routledge 01-02-2014; Taylor & Francis Ltd
• Subjects: Applied economics; Bangladesh; Bootstrap mechanism; bootstrap simulations; C32; Causality; Developing countries; F22; F43; LDCs; Poverty; Poverty alleviation; poverty reduction; Remittances; SAMHÄLLSVETENSKAP; Social impact; SOCIAL SCIENCES; Studies; Bangladesh
• ISSN: 0003-6846; 1466-4283; 1466-4283
• DOI: 10.1080/00036846.2013.844331

The aim of this article is to investigate the causal relationship between remittances and poverty reduction in Bangladesh over the period 1976 to 2010. This issue is of fundamental importance for the developing economy of Bangladesh. We apply newly developed methods by Hacker and Hatemi-J (2006, 2012) that are based on simulations and are robust to the violation of statistical assumptions especially when the sample size is small, as is the case in this article. Our estimation results reveal that causality nexus of poverty and remittances is bi-directional. We also find that the causal impact of poverty reduction on remittance is stronger than the reverse impact. This finding implies that Bangladeshi policy-makers can influence remittances through poverty reduction in the long run.