Investigating the impact of international remittances on economic growth of Ghana

Abstract

In recent years remittances have gained attention among researchers, policy makers, members of the civil society and international community due to their increasing size. In this study, the main aim was to examine the impact of international remittances on economic growth of Ghana from 1980 to 2015.The study employed annual time series data and applied autoregressive distributed lag (ARDL) model as the estimation technique. The results show that remittance and economic growth over the study period showed an increasing trend. The short and long run results revealed that remittance has positive but insignificant influence on economic growth. The result further revealed that in the short run trade openness impact negatively on economic growth whereas government expenditure influenced economic growth positively. The long run result revealed that good governance, labour force and government expenditure significantly influence economic growth positively. Trade openness and financial development were revealed to have negative and significant influence on economic growth. Based on the positive relationship between remittance and economic growth, it is therefore recommended that policies regarding emigration should be structured properly to mobilize migrant capital to enhance economic growth. It is also recommended that government should implement policies that can motivate people to export more and import less to change the negative effect trade openness has on economic growth. Citizens must also be encouraged to patronage locally produced goods which will reduce the amount of imported goods to enhance economic growth. These are likely to enhance economic growth and the entire welfare of Ghanaians.