Macroeconomic Determinants of Private Inward Remittances in Ghana: An Empirical Study

Abstract

This study seeks to examine the main macroeconomic determinants of private inward remittances in Ghana from 1970 to 2010. After reviewing the theoretical and empirical literature on the topic, a statistical model was specified with private inward remittances as the dependent variable. The independent macroeconomic variables include: income, trade openness, real interest rate, inflation rate and exchange rate. Secondary data were collected on the variables. The specified Error-correction model was estimated by the Ordinary Least Squares (OLS) technique based on Engel and Granger two-step estimation approach. The results of the study revealed that macroeconomic factors are very much important in determining the inflow of private inward remittances in Ghana. The main policy implication of the study is that the government of Ghana must continue to pursue prudent macroeconomic policies in order to attract the needed private inward remittances to supplement the domestic resources to boost savings and investment.

Keywords: Private inward remittances, macroeconomic determinants, Error-correction model, stationarity, cointegration.