Worker’s Remittances and Economic Growth in Sri Lanka: An ARDL Cointegration Approach

Abstract

This study examines the relationship between worker’s remittances and economic growth in Sri Lanka using Auto Regressive Distributed Lag (ARDL) approach for cointegration. It employs secondary time series data for Remittances, GDP, Exports and Investment gathered from World Development Indicators for the period from 1975 to 2015. The bounds test indicates that there exists a long run relationship between worker’s remittances and economic growth in Sri Lanka during the study period. Short-run relationship between remittances and GDP is also captured from the Error Correction Model. Therefore, the policy makers can focus on increasing potential to earn more remittances and directing households to spend them on productive channels.