IMPACT OF REMITTANCE INFLOWS ON SELECTED SOUTH-EAST EUROPEAN ECONOMIES: A PANEL AUTO-REGRESSIVE DISTRIBUTED LAG APPROACH

The impact of remittance inflows on economic development is contested in the existing literature. This article applies a panel auto regressive distributed lag to examine the impact of remittance inflows on economic growth and self-employment percentage in a panel of seven Southeast European countries between 1996 and 2020. The countries included in the panel are characterized by higher remittance inflows and include Albania, Bosnia and Hercegovina, Croatia, Kosovo, Montenegro, North Macedonia, and Serbia. The findings of the article indicate that there is no short-run relationship between remittance inflows and economic growth, but that remittance inflows are a significant contributor to economic growth in the long run. The article finds that in the short run, remittance inflows actually decrease the self-employment rate which can be attributed to the poverty alleviation impact of remittance flows, while there is no statistically significant relationship between remittance inflows and the self-employment rate in the long-run. This indicates that there are opportunities to utilize the significant remittance inflows in more meaningful ways to stimulate investment opportunities.