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An Evaluation of the Determinants of Workers’ Remittances: Evidence from Sri Lanka

Received: 26 May 2022     Accepted: 21 June 2022     Published: 4 August 2022
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Abstract

Workers’ remittance inflows have historically been a driving force of the Sri Lankan economy. However, the inflow of workers’ remittances contracted significantly in 2021 reflecting the implications of the COVID-19 pandemic and the increased tendency to remit money through informal channels. At the same time, the external sector continues to show the significant vulnerabilities making numerous challenges for the economy. In this context, promoting workers’ remittance inflows to the country is imperative to overcome the heightened external shocks. Also, the importance of workers’ remittances as a steady source of foreign exchange in Sri Lanka has grown among the researchers and the policy makers. In this backdrop, this study aims to examine the macroeconomic determinants of inflow of workers’ remittances in the context of Sri Lanka. The Johansen Cointegration Technique and the Vector Error Correction Model (VECM) specified under Vector Auto Regression (VAR) framework were used to estimate the model. The annual data on related macroeconomic variables for the period 1986-2019 were used to conduct the analysis. The results of the study found that the depreciation of domestic currency appeared to be positively correlated with the inflows of workers’ remittance in both long run and short run in Sri Lanka. Moreover, annual departures for migration, domestic deposit rate and world oil prices showed a positive influence on the inflow of workers’ remittances in the long run. The overall outcomes of the study suggest that altruistic and investment motives are considered to be the driving forces for remitting money to Sri Lanka.

Published in American Journal of Science, Engineering and Technology (Volume 7, Issue 3)
DOI 10.11648/j.ajset.20220703.12
Page(s) 62-76
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2022. Published by Science Publishing Group

Keywords

Remittance, Migration, Exchange Rate, Vector Error Correction, Sri Lanka

References
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Cite This Article
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    Thilak Ranjeewa Priyadarshana. (2022). An Evaluation of the Determinants of Workers’ Remittances: Evidence from Sri Lanka. American Journal of Science, Engineering and Technology, 7(3), 62-76. https://doi.org/10.11648/j.ajset.20220703.12

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    Thilak Ranjeewa Priyadarshana. An Evaluation of the Determinants of Workers’ Remittances: Evidence from Sri Lanka. Am. J. Sci. Eng. Technol. 2022, 7(3), 62-76. doi: 10.11648/j.ajset.20220703.12

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    Thilak Ranjeewa Priyadarshana. An Evaluation of the Determinants of Workers’ Remittances: Evidence from Sri Lanka. Am J Sci Eng Technol. 2022;7(3):62-76. doi: 10.11648/j.ajset.20220703.12

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  • @article{10.11648/j.ajset.20220703.12,
      author = {Thilak Ranjeewa Priyadarshana},
      title = {An Evaluation of the Determinants of Workers’ Remittances: Evidence from Sri Lanka},
      journal = {American Journal of Science, Engineering and Technology},
      volume = {7},
      number = {3},
      pages = {62-76},
      doi = {10.11648/j.ajset.20220703.12},
      url = {https://doi.org/10.11648/j.ajset.20220703.12},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ajset.20220703.12},
      abstract = {Workers’ remittance inflows have historically been a driving force of the Sri Lankan economy. However, the inflow of workers’ remittances contracted significantly in 2021 reflecting the implications of the COVID-19 pandemic and the increased tendency to remit money through informal channels. At the same time, the external sector continues to show the significant vulnerabilities making numerous challenges for the economy. In this context, promoting workers’ remittance inflows to the country is imperative to overcome the heightened external shocks. Also, the importance of workers’ remittances as a steady source of foreign exchange in Sri Lanka has grown among the researchers and the policy makers. In this backdrop, this study aims to examine the macroeconomic determinants of inflow of workers’ remittances in the context of Sri Lanka. The Johansen Cointegration Technique and the Vector Error Correction Model (VECM) specified under Vector Auto Regression (VAR) framework were used to estimate the model. The annual data on related macroeconomic variables for the period 1986-2019 were used to conduct the analysis. The results of the study found that the depreciation of domestic currency appeared to be positively correlated with the inflows of workers’ remittance in both long run and short run in Sri Lanka. Moreover, annual departures for migration, domestic deposit rate and world oil prices showed a positive influence on the inflow of workers’ remittances in the long run. The overall outcomes of the study suggest that altruistic and investment motives are considered to be the driving forces for remitting money to Sri Lanka.},
     year = {2022}
    }
    

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    AU  - Thilak Ranjeewa Priyadarshana
    Y1  - 2022/08/04
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    DO  - 10.11648/j.ajset.20220703.12
    T2  - American Journal of Science, Engineering and Technology
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    AB  - Workers’ remittance inflows have historically been a driving force of the Sri Lankan economy. However, the inflow of workers’ remittances contracted significantly in 2021 reflecting the implications of the COVID-19 pandemic and the increased tendency to remit money through informal channels. At the same time, the external sector continues to show the significant vulnerabilities making numerous challenges for the economy. In this context, promoting workers’ remittance inflows to the country is imperative to overcome the heightened external shocks. Also, the importance of workers’ remittances as a steady source of foreign exchange in Sri Lanka has grown among the researchers and the policy makers. In this backdrop, this study aims to examine the macroeconomic determinants of inflow of workers’ remittances in the context of Sri Lanka. The Johansen Cointegration Technique and the Vector Error Correction Model (VECM) specified under Vector Auto Regression (VAR) framework were used to estimate the model. The annual data on related macroeconomic variables for the period 1986-2019 were used to conduct the analysis. The results of the study found that the depreciation of domestic currency appeared to be positively correlated with the inflows of workers’ remittance in both long run and short run in Sri Lanka. Moreover, annual departures for migration, domestic deposit rate and world oil prices showed a positive influence on the inflow of workers’ remittances in the long run. The overall outcomes of the study suggest that altruistic and investment motives are considered to be the driving forces for remitting money to Sri Lanka.
    VL  - 7
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Author Information
  • Department of Foreign Remittances Facilitation, Central Bank of Sri Lanka, Colombo, Sri Lanka

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