INVESTIGATION OF THE IMPACT OF FOREIGN REMITTANCE ON AGRICULTURAL DEVELOPMENT IN PAKISTAN: A Time Series Analysis

The present study investigates the impact of foreign remittance on agricultural development in Pakistan, from different regions of the world. Segregated time series data of remittance, agricultural GDP, primary school enrollment and gross fixed capital formation in agriculture sector were taken for the period 1972 to 2012. Co-integration technique was employed to analyze the longrun impact of these variables on agricultural GDP. The coefficients of remittance from Kingdom of Saudi Arabia, UAE, United Kingdom and other Gulf and European countries were found to be significant and positive in the long-run, but it was non-significant in the short-run. The effect of remittance from advanced countries as USA, Canada and Australia showed a negative and significant effect on agricultural GDP in the long-run but it was non-significant in the short-run. The variables of primary school enrollment and gross fixed capital formation were also significantly and positively associated with agricultural GDP growth in the long-run. The findings reveal that remittance play a vital role to meet needs of the agricultural sector. This study suggests that government should devise a policy to encourage migrant’s households in rural Pakistan and use remittance in productive activities. The results also suggest that policies should also be devised to promote primary education and increase the fixed-capital formation in agriculture sector.

Key words: Cointegration, Remittance, ADF-Test, Kingdom of Saudi Arabia, UAE, United Kingdom.