ISSN: 1019-7044
Volume XLV (3 & 4) & XLVI (1 & 2), September 2020 - June 2021
Published: April 2022
Pages:
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Due to the existence of intriguing association and mixed conclusions from the past studies, this study reexamines the linkage between domestic investment and remittances in Bangladesh by using time series data from 1976 to 2016. Employing Fully Modified Ordinary Least Square (FMOLS), this study reveals that remittances unlike domestic interest rate have a significant positive impact on domestic investment in the long-run. This study also exposes the significant positive impact of both foreign exchange rate and per capita GDP on remittances in the long-run. Hence over time, depreciation in Bangladeshi currency and an increase in per capita GDP increase remittances which afterwards increase domestic investment. Significant positive impact of foreign exchange rate and per capita GDP on remittances and significant positive impact of remittances on domestic investment in the long-run claim the dominance of investment motive of remittances. This study suggests that to boost up remittance, depreciation of domestic currency should be in a convenient level for the greater interest of the economy. Besides the double-digit interest rate affects negatively to domestic investment and our domestic lending interest rate is not lower enough to increase domestic investment.
Keywords: Bangladesh , Domestic Investment , Domestic Interest Rate , Foreign Exchange Rate , Per Capita GDP , Remittances
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