Remittance and poverty nexus in Botswana: A multivariate approach

Abstract

This study investigates the causal relationship between remittance and poverty in Botswana using time series data from 1980-2017. To improve the robustness of the results, two poverty proxies are used, namely: household consumption expenditure and infant mortality rate. Employing the autoregressive distributed lag approach (ARDL) to cointegration and ECM-based causality test, the findings of the study reveal a short-run and long-run bidirectional causal relationship between poverty and remittance when household consumption expenditure is used as a proxy for poverty. However, when poverty is measured by infant mortality rate, a unidirectional causal relationship is confirmed both in the long run and the short run from poverty to remittance. Employing the same proxy, remittance was found to have an indirect causal effect on poverty through real gross domestic product per capita. The study concludes that remittance inflows play an important role in driving poverty reduction in Botswana, irrespective of whether the level of poverty is measured by household consumption expenditure or by infant mortality rate.