The Impact of Remittances on Economic Growth in Egypt During the Period (1975-2012) " Econometric analytical study"

Document Type : Original Article

Author

Assistant Professor of Economics Vice Dean for Education and Student Affairs Faculty of Economic Studies and Political Science Alexandria University Egypt

Abstract

The research aims to analyze the impactofremittancesoneconomic growth in Egypt. More specifically, it estimates the relationship between remittances and economic growth in the short and long run, and determines the pared to other factors affecting economic growth ; therefore contributing to the formulation of economic policies for developing such remittances and make them more efficient tool to raise the rate of economic growth. To achieve this aim, the research analyzes the remittances and their impact on the growth in the economic literature, and the evolution of the remittances and their relative importance in Egypt, both internal and external. Finally, the research uses the cointegration approach through two models: the ARDL and the DOLS toestimate the longrun relationnships. Moreover, the shortrun relationnships are estimated through the error correction model (ECM).
The remittances of Egyptians abroad were increased at high rates during the four decades covered by the research, which amounted 20.5 billion dollars in 2012. Egypt occupies the sixth position on the world level and ranked the first on the Middle East and North Africa level, reflecting the great importance of remittances abroad. In addition, the remittances are very important internally, they represent the second source of revenue for foreign currency after exportsrelative importance of remittances comand more important than development aid and foreign direct investment.
The results of both models are consistence, indicating that there is a longrun relationship between the variables. Remittances, exports, and domestic investment affect economic growth positively, while foreign direct investment affects it negatively. The explanatory power of the models is high.
The results of the ECM in the short run indicate that both the exports and domestic investment have a positive effect on economic growth, while remittances negatively affect it because it is directed to consumption rather than investment. The speed of adjustment is significant and high, and the explanatory power of the model is high, but lower than its counterpart in the longrun. The models undertaken all the statistical tests; confirming that the models are stables and have high goodness of fit.

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