Remittance inflows and poverty nexus in Botswana: A multivariate approach

Abstract

This study investigates the causal relationship between remittances (remittance inflows) and poverty in Botswana. Time series data is utilised from 1980-2017. To improve the robustness of the results, two poverty proxies are used, namely: household consumption expenditure and infant mortality rate. The study employs autoregressive distributed lag approach (ARDL) to cointegration and the error correction model (ECM)-based causality test, the findings of the study reveal a short-run and long-run bidirectional causal relationship between poverty and remittances when household consumption expenditure is used as a proxy for poverty. However, when poverty is measured by infant mortality rate, a unidirectional causal relationship from poverty to remittances is confirmed both in the long run and the short run. Using the same poverty proxy, remittances were found to have an indirect causal effect on poverty through real gross domestic product per capita. The study concludes that remittances 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.