Modelling Economic Growth in The Gambia: The role of Remittance and Inflation through ARDL Estimation
Keywords:
Remittance received, Inflation, Economic growth, ARDL model, Cointegration, Error Correction Model (ECM), The Gambia, Time series Analysis
Abstract
This study explores the relationship between remittances received, inflation and economic growth in The Gambia using annual time series from 2003 to 2024. Employing the Autoregressive Distributed Lag (ARDL) bounds testing model to assess both shot-run and long-run interactions among variables. Remittance inflows have increased dramatically in The Gambia in the last two decades. The result confirms a long-run equilibrium with Error Correction Model (ECM) showing a negative and statistically significant coefficient, indicating a stable long run adjustment mechanism towards equilibrium. However, while remittances and inflation exhibit positive long-run effects on economic growth, these effects are statistically insignificant, suggesting that remittances are primarily directed towards consumption rather than productive investments, and that inflation impact maybe offset by other macroeconomic factors. To enhance the developmental impact of remittance inflows, the study targets financial instruments such as diaspora bonds, matched investment schemes, and remittance-supported business tax incentives. It also recommends inflation targeting policies to reserve purchasing power and macroeconomic stability. The originality of the study lies in its empirical application of the ARDL framework to the Gambia’s remittance and growth nexus, offering policy with a relevant insight for harnessing the financial inflows for sustainable economic development.
References
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Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289–326. https://doi.org/10.1002/jae.616
Poonam, Ravinder, & Saini, V. (2024). Understanding the Role of Exports and FDI in Remittances-Growth Nexus in Globalised India. The Indian Economic Journal. https://doi.org/10.1177/00194662241262506
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Sobiech, I. (2019). Remittances, finance and growth: Does financial development foster the impact of remittances on economic growth? World Development. https://doi.org/10.1016/J.WORLDDEV.2018.08.016
Sowe, A., Mohsin, M. I. A., Economics, M. M.-I. J. of I., & 2023, U. (2023). Analysing the Roots of Inflation in the Gambia: an Islamic Approach To Resolving the Issue. Ijiefer.Kuis.Edu.My, 6(2), 110–120.
Stony Brook University, C. of E. and A. S. (2015). Unit Root & Augmented Dickey-Fuller ( ADF ) Test Covariance Stationary series.
Update, E. (2024). Gambia-The2024(World Bank).
Yuliawan, R., Murdiawati, M., Faqih, M., Haris, R. A., & Sulistyawati, A. (2024). The Impact of Monetary Policy, Inflation Rates, and Foreign Direct Investment on Economic Growth in Developing Countries. Join: Journal of Social Science, 1(4), 373–380. https://doi.org/10.59613/gjq7cm27
Zaman, S., Wang, Z., & Zaman, Q. uz. (2021). Exploring the relationship between remittances received, education expenditures, energy use, income, poverty, and economic growth: fresh empirical evidence in the context of selected remittances receiving countries. Environmental Science and Pollution Research, 28(14), 17865–17877. https://doi.org/10.1007/s11356-020-11943-1
Aboulezz, N. (2016). Remittances and Economic Growth Nexus: Empirical Evidence from Ghana. International Journal of Academic Research in Business and Social Sciences, 5(12). https://doi.org/10.6007/ijarbss/v5-i12/1958
Adewumi, S., Ogbodo, C., & Onoh, J. (2019). Human Capital Flight, Remittances and the Problem of Achieving Sustainable Economic Growth in Africa.
Analyzing the Challenges of Diversifying the Future Economy of Ukraine. (2024). Futurity Economics&Law, 125–143. https://doi.org/10.57125/FEL.2024.03.25.08
Azizi, S., Aftabi, A., Azizkhani, M., & Yektansani, K. (2024). Remittances and economic growth: a blessing for middle-income countries, ineffective for low-income countries. Journal of Economic Studies, 51(6), 1285–1303. https://doi.org/10.1108/JES-04-2023-0207
Barro, R. (1995). Inflation and Economic Growth. https://doi.org/10.3386/w5326
Ben Haddad, H., & Choukir, J. (2017). Short- and long-run effects of remittance outflow shocks on the Saudi Arabian economy. International Journal of Economics and Business Research, 14(2), 194. https://doi.org/10.1504/IJEBR.2017.10007794
Cazachevici, A., Havránek, T., & Horvath, R. (2020). Remittances and economic growth: A meta-analysis. World Development. https://doi.org/10.1016/J.WORLDDEV.2020.105021
Ceesay, E. K., Sanneh, T., Jawo, A., Jarju, M., & Jassey, O. (2019). Impact of Personal Remittances Received on Economic Growth in the Gambia. And Applied Research Journal, 1(1), 117.
Eggoh, J., Bangake, C., & Semedo, G. (2019). Do remittances spur economic growth? Evidence from developing countries. The Journal of International Trade & Economic Development, 28, 391–418. https://doi.org/10.1080/09638199.2019.1568522
Elijah, S., Hamzah, H. Z., Hook, L. S., & Kaliappan, S. R. (2024). Determinants of Migrants Remittances in Malaysia: An Ardl Approach. International Journal of Industrial Engineering and Production Research, 35(1). https://doi.org/10.22068/ijiepr.27.4.321
Employment in agriculture, migration, bilateral aids, economic growth and remittance: Evidence from the Gambia. (n.d.).
Foday, J., & Sheriff, T. (2021). The Impact of Remittance Flow on Real Effective Exchange Rate: Empirical Evidence from The Gambia. Munich Personal RePEc Archive, 106045.
Hari Prassed Upadhyay, B. L. P. O. P. , K. R. S. , D. R. S. (2022). Follow this link :
Hwang, J., & Wu, M. (2011). Inflation and Economic Growth in China: An Empirical Analysis. China & World Economy, 19(5), 67–84. https://doi.org/10.1111/j.1749-124X.2011.01259.x
Jallow, C., Note, A., Jallow, C., & Zaim, I. S. (2023). Journal of Development Innovations Vol. 7, No. 1, 2023. 7(2), 41–55.
K. Datta, & C. Kumar. (2011). Relationship between Inflation and Economic Growth in Malaysia. International Conference on Economics and Finance Research IPEDR, 4(2), 415–419.
Khan, M. K., Teng, J. Z., & Khan, M. I. (2019). The effect of migrant remittances on economic growth: An ARDL approach. Engineering Economics, 30(4), 434–441. https://doi.org/10.5755/j01.ee.30.4.21830
Lowe, A. B. (2019). The Impact of Exchange Rate on Inflation: A Case Study of The Gambia(1978-2016). European Scientific Journal ESJ, 15(10), 261–277. https://doi.org/10.19044/esj.2019.v15n10p261
Mendy, S. (2019). on the Inflation Growth Nexus : Evidence From Time Series Methods in the Gambia Master ’ S Thesis on the Inflation Growth Nexus : Evidence From Time Series Methods in the Gambia.
Ming-Tang, L. (2020). Keynes’s Theory and Inflation. Keynes’s Theory and Inflation, 10.
Mohamed, I., & Va, R. (2010). Error Correction Model (ECM).
Naveed et al. (2013). [WIP] Mp r a. Economic Policy, 2116, 0–33.
Nguyen Quang Linh. (2024). The relationship between inflation and economic growth: Empirical evidence from Vietnam in 1996-2023. VNU University of Economics and Business, 4(4), 86. https://doi.org/10.57110/vnu-jeb.v4i4.271
Nyamongo, E., Misati, R., Kipyegon, L., & Ndirangu, L. (2012). Remittances, financial development and economic growth in Africa. Journal of Economics and Business, 64, 240–260. https://doi.org/10.1016/J.JECONBUS.2012.01.001
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289–326. https://doi.org/10.1002/jae.616
Poonam, Ravinder, & Saini, V. (2024). Understanding the Role of Exports and FDI in Remittances-Growth Nexus in Globalised India. The Indian Economic Journal. https://doi.org/10.1177/00194662241262506
Rao, B., & Hassan, G. (2009). A panel data analysis of the growth effects of remittances. Economic Modelling, 28, 701–709. https://doi.org/10.1016/J.ECONMOD.2010.05.011
Remittances and Economic Growth: Empirical Analysis from a Panel of Selected Asian Nations. (n.d.).
Sobiech, I. (2019). Remittances, finance and growth: Does financial development foster the impact of remittances on economic growth? World Development. https://doi.org/10.1016/J.WORLDDEV.2018.08.016
Sowe, A., Mohsin, M. I. A., Economics, M. M.-I. J. of I., & 2023, U. (2023). Analysing the Roots of Inflation in the Gambia: an Islamic Approach To Resolving the Issue. Ijiefer.Kuis.Edu.My, 6(2), 110–120.
Stony Brook University, C. of E. and A. S. (2015). Unit Root & Augmented Dickey-Fuller ( ADF ) Test Covariance Stationary series.
Update, E. (2024). Gambia-The2024(World Bank).
Yuliawan, R., Murdiawati, M., Faqih, M., Haris, R. A., & Sulistyawati, A. (2024). The Impact of Monetary Policy, Inflation Rates, and Foreign Direct Investment on Economic Growth in Developing Countries. Join: Journal of Social Science, 1(4), 373–380. https://doi.org/10.59613/gjq7cm27
Zaman, S., Wang, Z., & Zaman, Q. uz. (2021). Exploring the relationship between remittances received, education expenditures, energy use, income, poverty, and economic growth: fresh empirical evidence in the context of selected remittances receiving countries. Environmental Science and Pollution Research, 28(14), 17865–17877. https://doi.org/10.1007/s11356-020-11943-1
Published
2025-09-29
Section
Articles
Copyright (c) 2025 Salim Minteh, Amadou Gissay, Katim Touray
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