Income thresholds in the remittances-growth association? a case study of Fiji

ABSTRACT

Research indicates that remittances have mixed effects on growth. In this study, we investigate the role of income thresholds in this association for Fiji. Income thresholds are measured by thresholds in per-worker real GDP and are identified using the self-exciting threshold autoregression model over the period 1980 to 2017. A threshold autoregressive distributed lag model is subsequently developed. A single threshold in per-worker real GDP is estimated at US$5891. Remittances promote growth if income exceeds the threshold but is negative otherwise. Hence, remittances support growth-enhancing activities at high-income levels but may finance imports at the expense of domestic production at lower income levels.

KEYWORDS:

• Self-exciting threshold autoregression
• threshold autoregressive distributed lag model
• remittance led growth
• small island developing states

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ We thank the anonymous reviewer for highlighting this point.