Time Series Forecast of Remittance in Bangladesh
Forecast of Remittance in Bangladesh
A Time Series Forecast
8/11/2012 North South University
Prepared by: Athena Rahmetullah Leonora Adhikari Nudrat Faria Shreya Sumaita Maisha Tajkia Mahmud
I.
INTRODUCTION
Remittances are funds transferred from migrants to their home country. They are the private savings of workers and families that are spent in the home country for food, clothing and other expenditures, and which drive the home economy. Remittance inflows in the economy of Bangladesh are getting larger every passing year, matching with the increasing external demand for its manpower. Remittances have helped improve the social and economic indicators like nutrition, living condition and housing, education, health care, poverty reduction, social security, and investment activities of the recipient households. The relative weight of remittances has also increased against most of the macroeconomic variables alongside the contribution to GDP. Moreover, Bangladesh has been able to avoid any serious imbalances in balance of payments current account, although it has persistent merchandize trade deficits. Not only that, the export tradable sector has thus far remained unaffected from the Dutch Disease effects of remittances. (Dutch Disease effect of remittances is the appreciation of home currency due to increase in remittances.) Remittance inflows in recent years have been instrumental in maintaining the current account surplus despite widening a trade deficit.
II.
BACKGROUND
The key determinants of changes in the level of remittance inflow are number of workers finding employment abroad every year, oil price, exchange rate and GDP growth. An increase in number of migrant workers and oil prices results in an increase in remittance, while depreciation of exchange rate increases remittance. Each additional migrant worker brings in $816 in remittances annually. Every dollar increase in oil price increases annual remittance by nearly $15 million.
A Time Series Forecast
8/11/2012 North South University
Prepared by: Athena Rahmetullah Leonora Adhikari Nudrat Faria Shreya Sumaita Maisha Tajkia Mahmud
I.
INTRODUCTION
Remittances are funds transferred from migrants to their home country. They are the private savings of workers and families that are spent in the home country for food, clothing and other expenditures, and which drive the home economy. Remittance inflows in the economy of Bangladesh are getting larger every passing year, matching with the increasing external demand for its manpower. Remittances have helped improve the social and economic indicators like nutrition, living condition and housing, education, health care, poverty reduction, social security, and investment activities of the recipient households. The relative weight of remittances has also increased against most of the macroeconomic variables alongside the contribution to GDP. Moreover, Bangladesh has been able to avoid any serious imbalances in balance of payments current account, although it has persistent merchandize trade deficits. Not only that, the export tradable sector has thus far remained unaffected from the Dutch Disease effects of remittances. (Dutch Disease effect of remittances is the appreciation of home currency due to increase in remittances.) Remittance inflows in recent years have been instrumental in maintaining the current account surplus despite widening a trade deficit.
II.
BACKGROUND
The key determinants of changes in the level of remittance inflow are number of workers finding employment abroad every year, oil price, exchange rate and GDP growth. An increase in number of migrant workers and oil prices results in an increase in remittance, while depreciation of exchange rate increases remittance. Each additional migrant worker brings in $816 in remittances annually. Every dollar increase in oil price increases annual remittance by nearly $15 million.