Working Paper Series: Special Edition of 2016 to 2018 Interns

Table 4 shows the bivariate correlations among variables. Per capita GDP, as expected, is positively correlated with foreign direct investments. Remittances, trade openness, fiscal balance, final private consumption, inflation and population growth are all negatively correlated with per capita GDP. Final private consumption is highly positively correlated with remittances at the 5% level of significance which indicates that remittance inflows to the region are altruistically motivated. Furthermore, inflation is positively correlated with remittances complementing the results of Narayan et al (2011). Intuitively, this is the case when increases in inflation is recognized to be that of the domestic country. However, it can be argued that remittances inflow may decrease if inflation in the foreign country increases.. On the other hand, one might argue that the positive relationship can have bi-directional causality. Is it that higher inflow of remittance signals more purchasing power, thus increasing the demand for the same basket of goods, which leads to inflation, or does inflation in the domestic country make remitters send more money so family back home can maintain their consumption spending based on the pure altruism theory?

Table 4. Bivariate Correlations of Variables in Study 35

35 The table displays the correlation matrix of the main regression variables. Stars (*) denote significance at the 5 percent level of significance.

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