The impact of personal remittances inflow on inflation: Evidence from South Africa

Abstract

Personal remittances inflow constitutes one of the most important sources of external finance for many developing countries. Although it shows a decreasing trend in recent years, South Africa after 1970s with her regular and massive labour migration has been still one of the gainer countries on remittances across the world. Empirical studies that implemented for various countries reveal personal remittances inflow may have increasing, decreasing or neutral effects on inflation and other macroeconomic variables. This study aims at investigating whether personal remittances induce inflation in South African economy during the period (1979-2022) by employing ARDL techniques. The main findings show that there is no long run relationship between personal remittances inflow and inflation because the variables are not cointegrated but showed a positive impact of remittances on inflation in short run. Keywords: Personal Remittances inflow, Inflation, Causality.