Nexus between Remittance and Household Consumption: Fresh Evidence from Symmetric or Asymmetric Investigation

Abstract

There is no conclusive evidence available in empirical literature regarding the patter of relationship, like symmetry or asymmetry, between remittances and household consumption at the aggregate level. With this study, we empirically investigated the nexus between Remittance and Household consumption under the assumption of both symmetric and asymmetric from 1993 to 2017 of a panel of 105 countries. Symmetry investigation performed with Panel ARDL proposed by Pesaran et al. (1999) and asymmetry test executed with the idea of nonlinear ARDL proposed by Shin et al. (2014). For establishing directional causality, we also performed a Panel Granger-causality test under the error correction term. Study findings unveiled an asymmetric relationship between remittance flows and household consumption both in the long run and in the short run, however, the coefficients elasticity explained greater magnitude in the short-run than the long run. Study findings exposed unidirectional causality from remittance to household consumption in the short-run. The effect of remittance inflows on household consumption at the aggregate level is evident. Therefore, the government should persuade integrated economic policy for the effective deployment of remittance flows in productive investment for increasing aggregate production and economic welfare at large.