Remittances and Economic Growth in Transition Countries

Abstract Migrants’ remittances have become an important development tool because they can raise income and reduce poverty rates in developing countries. These remittances might also promote development by providing funds that recipients can spend on education or health care or invest in entrepreneurial activities. Thus, workers’ remittances are a steadily growing external source of capital for developing countries. In spite of the fact that importance of remittances in total international capital flows are increasing, the relationship between remittances and growth has not been adequately studied. The main aim of this paper is to investigate the impact of remittances on economic growth for the transition countries. For the aim of the study, we test the hypothesis suggested by the Giuliano and Ruiz-Arranz (2005), which states that remittances can substitute for a lack of financial development and hence promote economic growth. We use panel data for the transition countries between the time period 2001-2012. The results of the study suggest that there is a negative significant effect of remittances on economic growth in the transition economies