Remittances and Consumption Expenditure in India: An ARDL Investigation


  • Ahamed Lebbe Mohamed Aslam Ministry of Public Administration and Home Affairs, Sri Lanka
  • Selliah Sivarjasingham


Remittances, Consumption, ARDL, India


This study investigates the empirical relationship between remittances and consumption expenditure in India over the period of 1975-2018 using the annual time series data. In this study, the Augmented Dickey-Fuller (ADF) and Phillips Perron (PP) unit root tests, the Autoregressive Distributed Lag (ARDL) Bounds cointegration technique, the Granger Causality test, and the Impulse Response Function analysis are employed as the analytical tools. The ADF and PP unit root test results indicate that the variables are stationary at 1st difference. The ARDL Bounds cointegration test result shows that remittances in India have a long-run reciprocal relationship with consumption expenditure. The error correction term shows that 15percent of disequilibrium error is corrected every year and the response variable of consumption expenditure moves to the long-run equilibrium path. The Granger Causality test results indicate that remittances Granger Cause the consumption expenditure. The impulse response analysis shows that a positive shock to remittances has an immediate significant positive impact on consumption expenditure. 


Ahmed, J. (2012). Cyclical Properties of Migrant's Remittances to Pakistan: What the data tell us. Economics Bulletin, 32(4), 3266-3278.

Andersson, L. (2012). Migration, remittances and household welfare in Ethiopia. Migration, 4, 1-40.

Ang, A., Jha, S., & Sugiyarto, G. (2009). Remittances and household behavior in the Philippines. Asian Development Bank Economics Working Paper, (188).

Aronsson, T., & Löfgren, K. G. (2007). Welfare theory: History and modern results. Umeå Economic Studies, 726.

Aslam, A. L. M., & Sivarajasingham, S. (2020a). The inter-temporal relationship between workers' remittances and consumption expenditure in Sri Lanka. Journal of Economic and Administrative Sciences.

Aslam, A. L. M., & Sivarajasingham, S. (2020b). Empirical relationship between workers' remittances and financial development (an ARDL cointegration approach for Sri Lanka). International Journal of Social Economics.

Attanasio, O., Di Maro, V., Lechene, V., & Phillips, D. (2013). Welfare consequences of food prices increases: Evidence from rural Mexico. Journal of Development Economics, 104, 136-151.

Bilal, S. M., Rauf, M., Nadeem, M., Almani, T., & Shah, M. K. (2015). Workers’ remittances and household consumption volatility in South Asia. Merit Research Journal of Education and Review, 3(10), 299-303.

Bouoiyour, J., & Miftah, A. (2015). The impact of migrant workers' remittances on the living standards of families in Morocco: A propensity score matching approach. Migration Letters, 12(1), 13.

Castaldo, A., & Reilly, B. (2015). Do migrant remittances affect the consumption patterns of Albanian households? South-Eastern Europe Journal of Economics, 5(1).

Chioma, N. J. (2009). Causal relationship between gross domestic product and personal consumption expenditure of Nigeria. African Journal of Mathematics and Computer Science Research, 2(8), 179-183.

Choithani, C. (2017). Understanding the linkages between migration and household food security in India. Geographical Research, 55(2), 192-205.

Combes, J. L., & Ebeke, C. (2011). Remittances and household consumption instability in developing countries. World Development, 39(7), 1076-1089.

De, P. K., & Ratha, D. (2012). Impact of remittances on household income, asset and human capital: Evidence from Sri Lanka. Migration and Development, 1(1), 163-179.

Diacon, P. E., & Maha, L. G. (2015). The relationship between income, consumption and GDP: A time series, cross-country analysis. Procedia Economics and Finance, 23, 1535-1543.

Ghosh, T., Anderson, S., Powell, R. L., Sutton, P. C., & Elvidge, C. D. (2009). Estimation of Mexico’s informal economy and remittances using nighttime imagery. Remote Sensing, 1(3), 418-444.

Glytsos, N. P. (2002). Dynamic effects of migrant remittances on growth: an econometric model with an application to Mediterranean countries (Vol. 74). Centre of Planning and Economic Research.

Glytsos, N. P. (2005). The contribution of remittances to growth. Journal of Economic Studies.

Granger, C. W. (1988). Some recent development in a concept of causality. Journal of econometrics, 39(1-2), 199-211.

Haider, M. Z., Hossain, T., & Siddiqui, O. I. (2016). Impact of remittance on consumption and savings behavior in rural areas of Bangladesh. Journal of Business, 1(4), 25-34.

Harris, R., & Sollis, R. (2003). Applied time series modelling and forecasting. Wiley. ISBN 9780470844434

Hatzipanayotou, P. (1991). International Migration and Remittances in a Two‐country Temporary Equilibrium Model. Journal of Economic Studies.

Hirsch, F. (2005). Social limits to growth. Revised edition (1995) London and New York: Routledge.

Hossain, A. N., & Hasanuzzaman, S. (2013). Remittances and investment nexus in Bangladesh: an ARDL bounds testing approach. International Review of Economics, 60(4), 387-407.

Incalţarau, C., & Maha, L. G. (2012). The impact of remittances on consumption and investment in Romania. Eastern Journal of European Studies, 3(2).

Jena, N. R., & Sethi, N. (2019). Does inward remittance lead to export performance in South Asian countries? International Journal of Social Economics.

Karki Nepal, A. (2016). The impact of international remittances on child outcomes and household expenditures in Nepal. The Journal of Development Studies, 52(6), 838-853.

Karpestam, R. P. D. (2012). Dynamic multiplier effects of remittances in developing countries. Journal of Economic Studies.

Kaya, A., & Şen, H. (2015). Taxes and private consumption expenditure: A component based analysis for Turkey.

Keynes, J. M. (1936). The General Theory of Money, Interest and Employment. MacMillan London.

Kirwan, F., & Holden, D. (1986). Emigrants' remittances, non‐traded goods and economic welfare in the source country. Journal of Economic Studies.

Mahapatro, S., Bailey, A., James, K. S., & Hutter, I. (2017). Remittances and household expenditure patterns in India and selected states. Migration and Development, 6(1), 83-101.

Medina, C., & Cardona, L. (2010). The effects of remittances on household consumption, education attendance and living standards: The case of Colombia. Lecturas de Economía, (72), 11-43.

Moss, M. (1973). Introduction to" The Measurement of Economic and Social Performance". In The Measurement of Economic and Social Performance (pp. 1-21). NBER.

Nisar, A., Khan, Z. U., & Atif, M. (2013). Econometric analysis of income, consumption and remittances in Pakistan: two stage least square method. The Journal of Commerce, 5(4), 1.

Ogunwole, O. O. (2016). Does remittances and output growth improve household welfare in Nigeria. Journal of Economics and Sustainable Development, 7(3), 44-55.

Ozturk, I., & Acaravci, A. (2010). The causal relationship between energy consumption and GDP in Albania, Bulgaria, Hungary and Romania: Evidence from ARDL bound testing approach. Applied Energy, 87(6), 1938-1943.

Parida, J. K., Mohanty, S. K., & Raman, K. R. (2015). Remittances, household expenditure and investment in rural India: Evidence from NSS data. Indian Economic Review, 79-104.

Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of applied econometrics, 16(3), 289-326.

Pestel, N., & Sommer, E. (2013). Shifting Taxes from Labor to Consumption: Efficient, but Regressive?

Phillip, P.M.G, & Selvamalai T (2018) Workers’ Remittances and Household Consumption Expenditure in Selected South Asian Countries Management Today, 8(1), 5-9.

Ramanayake, S. S., & Wijetunga, C. S. (2018). Sri Lanka’s Labour Migration Trends, Remittances and Economic Growth. South Asia Research, 38(3_suppl), 61S-81S.

Randazzo, T., & Piracha, M. (2014). Remittances and household expenditure behaviour in Senegal.

Rivera‐Batiz, F. L. (1986). International migration, remittances and economic welfare in the source country. Journal of Economic Studies.

Samaratunge, R., Kumara, A. S., & Abeysekera, L. (2020). Where do Remittances Go in Household Consumption? Empirical Evidence from Sri Lanka‐Wide Micro‐data. International Migration.

Semyonov, M., & Gorodzeisky, A. (2008). Labour migration, remittances and economic well-being of households in the Philippines. Population Research and policy review, 27(5), 619.

Shah, H., & Soomro, T. R. (2012).SZABIST-Dubai Working Paper Series.

Singh, B. (2004). Modelling real private consumption expenditure: an empirical study on Fiji. Economics Department, Reserve Bank of Fiji.

Steindel, C. (2001). The effect of tax changes on consumer spending. Current issues in economics and finance, 7(11).

Syrovátka, M. (2007). Aggregate measures of welfare based on personal consumption. In Environmental economics, policy and international relations. Sborník z konference konané (Vol. 22, p. 23).

Tabuga, A. D. (2007). International remittances and household expenditures: The Philippine case (No. 2007-18). PIDS Discussion Paper Series.

Tukker, A., Cohen, M. J., Hubacek, K., & Mont, O. (2010). The impacts of household consumption and options for change. Journal of Industrial Ecology, 14(1), 13-30.

Tumbe, C. (2012). Migration persistence across twentieth century India. Migration and Development, 1(1), 87-112. http://doi/abs/10.1080/21632324.2012.716225

Vakulabharanam, V., & Thakurata, S. G. (2014). Why do migrants do better than non-migrants at destination? Migration, class and inequality dynamics in India. The Singapore Economic Review, 59(01), 1450003.

Witt, U. (2016). The evolution of consumption and its welfare effects In Demand, Complexity, and Long-Run Economic Evolution, 117-139.

World Bank. (2017). World Development Indicators 2017, Washington, DC. © World Bank. License: CC BY 3.0 IGO.

Yasmeen, K., Anjum, A., Yasmeen, K., & Twakal, S. (2011). The impact of workers' remittances on private investment and total consumption in Pakistan. International Journal of Accounting and Financial Reporting, 1(1), 152.