“Being Poor Because of No Money”: Examining the Impact of International Remittance Inflows on Reducing Poverty

Abstract

This research article delves into the intricate relationship between remittance inflows and poverty eradication in the South Asian region, spanning the years from 1980 to 2021. Employing the autoregressive distributed lags (ARDL) model methodology, this study investigates the multifaceted dynamics of remittances while considering key control variables, including inflation, trade openness, and economic growth. The findings of this study unveil compelling insights into poverty reduction. Remittance inflows emerge as a potent instrument in alleviating poverty, exerting a positive impact in both the short and long term. In contrast, an elevated inflation rate is found to exacerbate poverty levels within the region. Interestingly, trade openness emerges as a crucial driver of long-term poverty reduction, while the effect of economic growth on poverty mitigation remains negligible. Notably, this research stands as a pioneering effort within the South Asian context, employing the poverty headcount ratio with a $2.15 per day threshold to gauge poverty levels. The implications of these findings are substantial for policymakers. The study recommends a shift in policy focus towards encouraging investment-oriented utilization of remittances, emphasizing their potential to foster sustainable economic development beyond immediate consumption. Moreover, maintaining effective control over inflation rates over extended periods is deemed imperative for the region’s success in poverty reduction. Furthermore, policymakers are urged to formulate trade policies that favor small-scale entrepreneurs, fostering inclusive growth and contributing to the long-term goal of poverty eradication. In sum, this research advances our understanding of the complex interplay between remittances, inflation, trade openness, and economic growth in the context of poverty alleviation in South Asia. Its empirical insights provide valuable guidance for policymakers striving to forge a path towards a more equitable and prosperous future for the region’s inhabitants.