The Remittances-Output Nexus: Empirical Evidence from Egypt

Abstract

This paper examines the long-run causal link between remittances and output in Egypt for the period 1977–2012. The long-run causal link is examined using the autoregressive distributed lag (ARDL) bounds test for cointegration, along with a vector error-correction model to estimate the short- and long-run parameters of equilibrium dynamics. Results show that remittances and GDP are cointegrated, with a statistically significant, positive causality running from remittances to output, while output is found not to be a long-run forcing factor of remittances in Egypt. The findings of this paper shed light on the importance of remittances for promoting economic growth in Egypt. Governmental policies that attract more remittance inflows, along with their efficient use, could promote economic growth in Egypt.