From Remittances to Renovations: Analyzing the Impact of Overseas Transfers on Construction Industry of Pakistan

Abstract

Objective: This study aims to analyze the impact of remittance inflows on the construction industry in Pakistan from 1973 to 2020.

Research Gap: The international diaspora has steadily retained a strong relationship with their families in their home countries through the provision of remittances. These remittances are important financial inflows, impacting various macroeconomic variables through consumption and investment channels. However, the specific influence of remittances on the construction industry remains underexplored.

Methodology: Autoregressive distributed lag model explores the long-run relationship among the concerned variables, while short-run results are analyzed through the error correction mechanism.

The Main Findings: The long-run findings indicate that GDP growth rate, external loans, scheduled bank advances to the construction industry, remittances, inflation, and value of the rupee against the dollar demonstrate a positive and statistically significant effect on the construction industry. A 1% increase in remittances boosts construction activities by 0.08%.

Practical Implications of the Findings: The results suggest that policy frameworks should be adopted to attract remittance inflows, fostering economic development, improving living standards, and generating employment opportunities.

Value:  Provision of adequate policy support for remitters, ensuring that remittance-driven investments are maximized to benefit Pakistan’s economic landscape.