The Role of Foreign Remmitances and Economic Growth in Poverty Alleviation: Time Series Evidence from Pakistan

This research study examined the effect of foreign remittances and economic growth on poverty in Pakistan. Annual time series data was analyzed for the time period 1978 to 2010. Augmented Dickey-Fuller and Philips-Perron confirmed the problem of non-stationarity at level. This problem was eliminated by taking first difference of all variables. Johansen-juselius co-integration test was applied for co-integration. The result indicated a single co-integration vector among variables. VECM was applied to capture long and short run relationships. Results confirmed that there is negative impact of foreign remittances and economic growth on poverty alleviation in long run. Short run relationship was not confirmed among variables by VECM. The ECT value revealed that model was in equilibrium and adjusts itself to external shock when poverty was taken as dependant variable. It is suggested that government should take steps to encourage workers to send their money through proper channel so its efficient utilization may be helpful in poverty alleviation. Jel Classification code: E01, F24, I32.