Bangladesh Bank Training Academy Journal

Abstract

This paper examines the determinants of remittance infl ows to Bangladesh considering the vital role it plays in the economy of Bangladesh and the ability of the gravity model to explain cross-country fl ows of remittances. Application of the gravity model to international trade and migration may provide valuable insights in explaining the underlying determinants of cross-border fl ows such as remittances and take effective policy actions in the face of any unforeseen adverse shock as seen in the negative remittance growth in 2013. We, therefore, apply a gravity model of remittances to a panel dataset comprising 13 countries for 2002-2013. Our study incorporates several additional economic factors e.g., consumer prices, unemployment rate, credit by the fi nancial system, output gap in migrant destinations relative to Bangladesh, the presence of bilateral labor trade agreements between two countries, whether the migrant destination country is an oil exporting country or not, in additionto typical gravity variables. Results of estimated models show that GDP per capita, migrant stock, foreign exchange rate, and output gap are signifi cant determinants of remittances at conventional signifi cance levels.