The impact of remittances on gdp and household consumption. An European Union countries analysis

Abstract

Due to the free migration of the labor force in the last years, the level of remittances had increased considerably. The remittances received by a country have an impact on its economy and economic growth. In this context, the present paper studies the effect of remittances received by national economies from the EU28 countries on the Gross Domestic Product and household consumption. The authors aim to measure the causality, in Granger sense, between remittances and Gross Domestic Product (per capita) for the European Union countries, on one hand, and between the remittances and the final consumption of households, on the other hand, for EU28, by using the Toda-Yamamoto approach for Granger causality evaluation, based on VAR models. The results show a positive influence of remittances on GDP only for Italy, Czech Republic, Deutschland and Greece. Influence of remittances on consumption can be confirmed only for the Czech Republic.