Remittances and Consumption Expenditure in India: An ARDL Investigation
Keywords: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.
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