Remittances Flow to Pakistan: A Gravity Approach
This study investigates macroeconomic determinant and potential of remittances flow to Pakistan from selected 12 major partners, using the augmented Gravity model on panel framework from 1995 to 2012. The Generalized Least Square technique is used to explain the macroeconomic behaviour of remittances flow. The result shows that the standard Gravity variables explain the remittances flow, and the result of augmented variables shows that the real exchange rate and inflation rate have significant positive, whereas the interest rate has significant negative impact. The binary variable for common language and GCC shows significant positive impact indicating importance of the Gulf region and common language for remittances flow. The potential of remittance flow shows existence of high potential in Japan, Germany, Norway, Qatar and Kuwait respectively. It urges Pakistan to send migrant workers to potential economies, and make domestic environment investment friendly and reduce interest rate to encourage remittances.
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