Interconnections between Remittances, Inflation, and Poverty in Pakistan and India

Abstract

The study aims to explore the interconnection between remittances, inflation, and poverty in Pakistan and India. The study employed an Autoregressive Distributed Lag model to estimate the short-run and long-run results from 1972 to 2020. The study uses the poverty headcount ratio (as a dependent variable while the variables remittances, GDP deflator, Gini Index, foreign direct investment, tax revenue, unemployment rate, and Urbanisation are used as explanatory variables. The study has also used Granger Causality analysis. The findings of the study indicate that remittances and foreign direct investment has a negative impact on poverty. On the other hand, poverty is positively impacted by the GDP deflator, Gini Index, tax revenue, unemployment rate, and Urbanisation in both Pakistan and India. The result also shows that in both Pakistan and inida, remittances do not Granger cause poverty, and poverty Granger causes remittances. GDP deflator does not Granger cause poverty and poverty does not Granger cause GDP deflator.  Policymakers should make policies to improve the remittances in both Pakistan and India. The planners should also make and implement policies that reduce the inflation rate in both Pakistan and India to reduce poverty.