Remittance Inflows and Sustainable Economic Growth in Bangladesh: An ARDL Bounds Testing Approach

Introduction, Literature, Methods, Result, Discussion and Conclusion

Abstract

As Bangladesh moves beyond LDC status, identifying the key drivers of sustained economic growth has become highly important. Remittance is one of the major sources of foreign exchange for Bangladesh and plays an important role in supporting household welfare and macroeconomic stability. However, its long-run contribution to economic growth remains an important empirical question. This study examines the impact of remittance on economic growth in Bangladesh using annual data from 1985 to 2024. The study applies the Autoregressive Distributed Lag (ARDL) model to analyze both short-run dynamics and long-run relationships. GDP per capita growth is examined in relation to remittance, investment, exports, foreign direct investment (FDI), and exchange rate. The Augmented Dickey-Fuller (ADF) test is used to check stationarity, while the ARDL bounds test is applied to examine cointegration. An Error Correction Model (ECM) is also used to analyze short-run adjustment. The findings show a strong and significant positive long-run relationship between remittance and economic growth. Investment and exports also contribute positively, while FDI is insignificant. Exchange rate depreciation negatively affects growth. The study suggests that remittance can support sustainable growth if it is productively invested and supported by economic diversification policies.