Inflow Remittances and Economic Growth: An Empirical Study of Jordan

Abstract

The objective of this paper is to investigate the effects of remittances inflow on real GDP growth in Jordan during the period 1976-2013. Data from World Bank and Central Bank of Jordan spanning the period of the study is used. Vector Error Correction Model (VECM) is employed in the analysis. The main findings are follows, analysis reveals a positive long-run (or equilibrium) relationship between economic growth, and each of capital, labor, and remittances in Jordan. In the short run, capital accumulation and labor compensations show no statistical significant association with real GDP growth, whereas remittances show negative impact on GDP growth. The error correction term that measures the speed of adjustment toward equilibrium is found negative in sign and statistically significant, where GDP growth corrects the short-run disequilibrium by 2.6%  a year.