Exploring the Relationship Between Remittance Inflows and Economic Growth in Zimbabwe (1990-2020) · Electronic Theses and Dissertations

Author

Mupindu, Brian

Title

Exploring the Relationship Between Remittance Inflows and Economic Growth in Zimbabwe (1990-2020)

Abstract

In Zimbabwe, remittance inflows constitute the largest source of foreign financial inflows,
exceeding FDIs and other financial inflows. This study aims to explore the relationship
between remittance inflows and economic growth in Zimbabwe. The research problem is to
determine if these remittances actually enhance economic growth in the country, given the
limited empirical evidence on the subject. The outcome of this research is fundamental in
providing insight for policy formulation towards achieving the country's objective of becoming
a middle-income economy by 2030. The OLS econometric model was used as the main model
of analysis, estimated using E-views 7 software, and a series of diagnostic and stability tests
were conducted to ensure model robustness. The sample consists of time series data from 1990
to 2020 obtained from various databases such as World Bank, IMF, RBZ and ZIMSTAT.
The study findings show that remittance inflows negatively affect economic growth in
Zimbabwe at a 1% significance level possibly due to the “Dutch Disease” phenomena.
Furthermore, findings point towards the negative impact of trade openness while gross capital
formation, financial development, and FDI positively affect economic growth and are
significant at a 5% significance level. The CUSUM test confirms 95% confidence in the
model's stability for forecasting.
The study recommends that policymakers should implement policies aimed at diversifying the
economy to reduce reliance on remittances as a source of foreign currency while
simultaneously promoting exports. Additionally, policymakers should prioritize gross capital
formation and financial development policies such as financial inclusion and addressing
correspondent banking relationships. This will improve the country's access to international
financial markets.

Date

2023

Publisher

BUSE

Keywords

Relationship Between

Supervisor

N/A