Effect of Workers' Remittances on Private Savings Behavior in Pakistan

Abstract

The study empirically examined the macroeconomic impact of remittances on private savings in Pakistan by applying the ARDL Bounds Testing Approach of co integration by using annual time series data for 1973-2007.It also analyzes the effectiveness of remittances and foreign direct investment in promoting savings. The results reveal that worker remittances positively affect the private savings in Pakistan in the long run and in the short run. So remittances are not only spent on basic consumption needs, but are also either saved or invested. But the effect of foreign direct investment on private savings is negative because it is not directly reached the poor households.