Impact of remittance on Nepalese economy and remittance inflow during covid-19 in Nepal

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The paper examines the impact of workers' remittance on economic growth using the dataset of 40 years from 1980 to 2019 and the remittance inflow pattern during the COVID-19 pandemic (2020-2021) in Nepal. The study uses various datasets from the Central Bank of Nepal, World Bank, World Health Organization, and Oxford University. First, we replicate (Makun, 2018) and (Jebran et al., 2016) study models. Both studies used the Autoregressive Distributive Lag (ARDL) model. One with real GDP as a dependent variable reflects cointegration in the context of Nepal, and similarly, GDP per capita as a dependent variable shows no cointegration. So, both the variables are considered a proxy for economic growth in our ARDL model, and workers' remittance, ODA, domestic credit to private sectors, and exports as explanatory variables. The findings suggest no long-term cointegration between the variables when the lag length is selected using a serial correlation test. When AIC is the default criterion for choosing the lag length and real GDP as the dependent variable, there is a long-run association between variables but insignificant. However, there is an inconclusive result when GDP per capita is a dependent variable. In addition, the diagnostic tests confirmed that selected models were homoscedastic, not serially correlated, with no omitted variable, and stable. In the second part, there seems to be a rising share of remittance on GDP when GDP per capita growth slackens in Nepal. In addition, there has been a rise in remittance inflow despite the increase in COVID-19 cases and the high stringency situation in Nepal. That graphical result is consistent with the (Kpodar et al., 2021) empirical study of 52 countries. The result confirms that remittance has worked as disaster relief to smooth consumption and compensate for income to low-income Nepalese families during the pandemic.

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