JBS Vol 18. Num 1_2. 2016 - Are Remittances Utilized for Investment in Bangladesh?: A Cointegration and VECM Analysis

Sifat I. Ishty
M. Wasiqur Rahman Khan

This paper utilizes a cointegration and vector error-correction model approach to investigate the connection between remittances and investment in Bangladesh. The long run positive association between remittances and investment which was found is in agreement with the literature. However, we also find evidence of a short-run negative relation between remittances and investment which might indicate that, in the short-run, remittances are used for non-investment purposes in the economy, a case reported for the first time in Bangladesh. Given the results we suggest that the authorities of Bangladesh take steps to encourage even further remittance inflows into the economy and in order to mitigate the short-run impact promote steps which may divert remittance into productive investments.