In a logistic smooth transition framework, this study examines the impact of remittance inflow on India’s economic growth, conditioned on the level of financial sector development. Results document regime dependence, and the estimated coefficients vary across the low- and high-financial-development regimes in both the short and long run. The complementary role of financial development in the remittance–growth nexus is reported during periods of low financial development. In contrast, during the period of high financial development, the impact of remittance inflow either weakens or turns negative. The results are robust to alternative models and additional proxy measures. Channelling of remittances to productive uses through enhanced financial inclusion and prevention of misallocation into speculative investments is recommended. JEL Codes: F02, F13, F15
Javed Ahmad Bhat (Fri,) studied this question.