| Abstract [eng] |
The Impact of Remittances on the Economic Growth The main purpose of this master thesis is to assess the impact of remittances on the economic growth of Lithuania. The work includes three main parts; the analysis of literature, research methods and the results carried out by the research itself. Literature analysis reviews the concept of remittances, its composition, properties, main reasons and motives, as well as the effects on a country’s economy and economic growth. Mainly, remittances are private, usually periodic, non-trading oriented and not rewarded cash flows sent by emigrants to their families left in home country driven by altruism and self – interest motives. In addition, remittances can have both positive and negative effects on a country’s economy. Primarily, at the micro level, remittances can increase the consumption of the households receiving them, reduce poverty, act as a precautionary measure against income fluctuations, and can also be used to invest in human or physical capital. Nevertheless, at the macro level, remittances can have some negative aspects as well such as state’s dependence on remittances in the long run, the decline in labor supply and the appreciation of the exchange rate (Dutch disease). Conclusively, the analysis of empirical papers on the impact of remittances on the economic growth suggest that results are often contradictory, the scientific consensus between the researchers is hardly reached and that time series econometrics modelling, especially vector error correction (VECM) and autoregressive distributed lag (ADL) models are the most prominent and appropriate methods for the analysis. The second part of the thesis – methodology – introduced the whole process of research, its variables, Dickey – Fuller and Phillips – Perron unit root tests, estimation procedure and interpretation of VECM and ADL. The performed research revealed that the use of VECM was in excess, therefore, final conclusions were drawn from ADL model. The results of the developed ADL model showed that for the endogenous control variables, during the analyzed period of 2004 – 2019, 1 percentage point increase in gross fixed capital formation and 1 percentage point increase in exports of goods and services is associated with 0.32 and 0.35 percentage point increase in Lithuania’s real GDP per capita, respectively, in line with ceteris paribus. However, when assessing the main research variable, no statistically significant impact of emigrant remittances on Lithuania’s economic growth was identified. Literature suggests that main reasons for having difficulties while detecting remittance effect on economic growth includes data quality and changes in measurement, lack of statistical power and migration opportunity cost to economic product. |
