Impact of remittances on economic performance in consideration of institutional quality Evidence from Asian developing economies

Purpose The purpose of this paper is to empirically assess the impact of remittances on the economic performance of the 16 Asian developing countries, taking account of their institutional qualities. Design/methodology/approach A panel of 16 Asian developing countries (Central Asia, South Asia, and ASEAN) over the period of 2002-2016 is employed in the analysis. To assess the impact of remittances on economic performance in consideration of institutional quality, OLS estimates as well as GMM are used. Findings The effect of remittances on economic growth is statistically significant. In addition, they also impact economic growth when they interact with institutional or financial development variables. For the long-run growth process of Central Asian, South Asian, and ASEAN countries, a sound and smooth institutional framework appears to be indispensable. Also, it was found that more fragile economies tend to achieve bigger growth than less fragile economies, as this kind of growth is triggered by more remittances flowing into fragile economies. However, the impact of remittances on growth does not depend on the level of ICT. FDI and financial development have positive impact on growth. Originality/value This paper exclusively considers the case of Asian developing countries (Central Asia, South Asia, and ASEAN) to assess the impact of remittances on the economic performance of these countries, with special consideration of the interaction effects of remittances and institutional quality in these emerging Asian economies. The previous studies on the effect of remittances on growth do not conform to one concrete conclusion. This study is undertaken in a bid to get the best possible result on the impact of remittances on the growth of the selected countries, majority of which attract substantial chunk of remittances into their economies.