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http://dx.doi.org/10.13106/jafeb.2021.vol8.no3.0139

The Role of Remittances in Financial Development: Evidence from Nonlinear ARDL and Asymmetric Causality  

MEHTA, Ahmed Muneeb (Hailey College of Banking and Finance, University of the Punjab)
QAMRUZZAMAN, Md. (School of Business and Economics, United International University)
SERFRAZ, Ayesha (Institute of Administrative Sciences, University of the Punjab)
ALI, Asad (Hailey College of Banking and Finance, University of the Punjab)
Publication Information
The Journal of Asian Finance, Economics and Business / v.8, no.3, 2021 , pp. 139-154 More about this Journal
Abstract
This study's impetus is to explore fresh evidence to answer the question, i.e., whether remittances asymmetrically influence financial development in Bangladesh from 1975 to 2019. The study employs several tests, i.e., nonlinear unit root test, Autoregressive Distributed Lagged (ARDL), NARDL, and asymmetric causality test for establishing the pattern of association. Nonlinear unit root tests confirm that variables follow a nonlinear system of being stationary after the first difference. nonlinearity among variables is investigated by performing the BDS test and nonlinear OLS. Directional causality is investigated through both linear and nonlinear effects of remittance inflows by following the non-granger casualty test. The test statistics of Fpass and tBDM showed the Long-run cointegration in the empirical model and positive effect running from remittances inflow to financial development both in the long-run and short-run. Furthermore, the results of a standard Wald test divulge the presence of long-run and short-run asymmetry. Asymmetry causality test established unidirectional causality due to positive and negative shocks in remittances inflows to Bank-based financial development and feedback hypothesis hold for explaining causality between positive and negative shocks in remittance inflows and Stock-based financial development.
Keywords
Remittances; Financial Development; ARDL; NARDL; Asymmetry Causality;
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