Bangladesh • Feature • Latest • Perspectives • Slide
Best of times … Worst of times … Progress path
Syed Nasir Ershad
There exists a long run relationship between the remittance and other variables like per capita GDP of home country as well as host country, broad money, exchange rate etc. Depreciation of domestic currency decreases the prices of goods and services in the foreign currency, which instigates a migrant to pay for more foreign goods rather than domestic ones. The migrant is comfortable as his income increases in the domestic currency encouraging buying more goods and services in home country. Even though depreciation may temporarily increase the flow of workers’ remittances in the home country, in the long run, it might undermine remitters’ confidence in the economy.
The exchange rate plays a positive role to increase the remittance inflow both in the long run and in the short run in Bangladesh. In the recent past Bangladesh has experienced a floating exchange rate and this country does not compromise the rules of fixing of exchange rate by demand supply interaction. That is why Bangladesh currency is becoming a stronger, leading to more remittances inflow. The fixed exchange rate regime of Bangladesh had served the country reasonably well. Remittances by Bangladeshi workers employed abroad play an important role in moderating the country’s trade deficit. The country’s performance in respect of remittances in dollar terms has maintained an uninterrupted upward trend. The performance of Bangladesh in terms of certain key objectives that an exchange rate regime is expected to promote has been quite satisfactory. On the other hand, higher rate of remittance inflow during the floating exchange rate regime of Bangladesh confirms efficient management of exchange rate.Remittances may reveal a portfolio choice about investment opportunities in the home and host country. This entails that as economic conditions in migrant sending countries to improve relatives of the migrant in the receiving country, more remittances are received in the worker-exporting countries through higher migrant savings and investment. Per capita gross domestic product of Bangladesh influence the remittance inflow negatively in the long-run and positively in the short-run. This indicates in the other way that remittance inflows mainly smoothens consumption of recipient households to compensate for negative income shocks. A better economic condition in the host countries has a vital role in higher remittance inflow into Bangladesh. Last few years Middle Eastern countries have experienced high rate of GDP growth. This higher remittance indicates that migrants send remittances so that those left behind can maintain a certain quality of life. Their motive is altruistic.
Countries with more developed financial markets would attract more remittances as financial development simplifies the process of money transfers and decrease the fee associated with sending remittances through official channels. Share of skilled-worker to total worker outflow has significant positive influence on remittance in the long run in Bangladesh. It implies that Bangladesh should send more skilled workers abroad. There is an upward shift in the flow of remittances from host countries which implies Bangladesh Government has taken appropriate and creative policies to increase worker sending to different countries. In recent past Government is able to send good number of workers to Qatar with very low migration cost because of right negotiation.
While per capita GDP of home country has positive impact on remittance inflow in the short run, increased domestic GDP reduces the need for remittance inflow in the long run.Exchange rate, economic condition of host countries, financial sectors development, government policy and skilled worker ratio upshot remittance inflow of Bangladesh. The long run co-integrating relationship among variables are helpful to understand the progress path of the country.