The Impact of Remittances on Domestic Savings: A Comparative Empirical Study of Egypt and the Philippines

Abstract

The issue of remittances has received considerable critical attention over the last two decades. A key aspect of remittances is their impact on several macroeconomic variables. Remittance flows are a significant part of international capital flows and play a crucial role in the economies of many developing countries. The purpose of this study is to explore the relationship between remittances and domestic savings during the period from 1981 to 2019 using Autoregressive Distributed Lag (ARDL). The study found that the rate of growth of remittances of Egyptian workers abroad has a positive and significant effect on domestic savings in the short and long term. However, there was no evidence that remittances of Filipino workers abroad influence the rate of domestic savings. The most interesting finding was that, even though the number of Egyptian workers abroad is five times the number of Filipino workers abroad, the value of remittances from Egyptians abroad is less than the value of remittances from the Philippines. Future studies on the current topic are therefore recommended.