The causal relationship between remittance and poverty in South Africa: A multivariate approach

Abstract

The main objective of this study is to investigate the causality between remittance and poverty in South Africa using time series data from 1980 to 2017. The study was motivated by the increasing role of remittance in poverty reduction and human development on the one hand, and the burgeoning inflow of remittance on the other hand. Since 1998, South Africa remittance inflow has shown a more or less upward trend. For example, in 1998 the country recorded an increase in remittance inflow by 18.5% and later maintained a steady increase in remittance inflows with an average increase of 25.3% during the period 1999 and 2017. Using the ECM-based Granger-causality approach in a multivariate framework, our results show that there is a unidirectional causality from poverty to remittance in the short run when infant mortality rate is used as a proxy for poverty. However, when household consumption is used as a proxy, no causality is found to prevail in both the short run and the long run. Policy implications are discussed.