Remittance inflow, exchange rate have long-term nexus: Research

A long-term relationship exists between remittance inflow and the exchange rate of the US Dollar, a tie that did not change even during the disruption of Covid-19 pandemic, according to a research paper.

The negative impact of the pandemic on remittances was short-lived, most likely due to government incentives, researchers said while presenting the paper at a conference today .

Explaining the issue, Dr Binayak Sen, director general of Bangladesh Institute of Development Studies (BIDS), who spoke at the event among others, told The Business Standard that market-based exchange rate increases remittance inflow. 

"If the exchange rate is artificially controlled, the remittance inflow reduces. The tendency to check the exchange rate opposes remittance inflows in the long run," said the economist.

The research paper, titled "The impact of the COVID-19 pandemic on remittances in Bangladesh", was presented at the "Dhaka Winter Conference in Economics-2023". 

The paper is written by Dr Khawaja Mamun from Sacred Heart University and Dr Hiranya Nath from Sam Houston State University. 

The event was jointly organised by the Bangladesh Economics Research Network (BERN), the Association for Economic and Development Studies on Bangladesh (AEDSB), and the BIDS. 

A total of nine academic papers were presented at the event by economists from home and abroad. Professor Fahad Khalil of the University of Washington spoke as keynote speaker on "Corruption and Incentives". 

In a paper titled "Does local government fragmentation reduce poverty? Evidence from Bangladesh", the researchers said increasing the number of local government units in each district can be an effective tool to reduce moderate poverty.

Increasing the number of local government units per 1,000 sq km would reduce moderate poverty in 40 districts, they said. However, it is less effective to reduce extreme poverty, which is restricted to specific contexts. 

Another paper titled on "Socio-economic inequalities and out-of-pocket (OOP) cost of diabetes in Bangladesh" by Abdur Razzaque Sarker, Research Fellow of BIDS, said about 27% of the households face distress financing as they had to borrow money, seek help from friends and relatives or sell assets for bearing the treatment cost of diabetes.

He added that diabetes and prediabetes are an overwhelming public health problem in Bangladesh. The annual average OOP cost per diabetes patient was $323. 

As a consequence, about 14% of households face catastrophic health expenditure in Bangladesh.

Atonu Rabbani, president of AEDSB and Shyamal Chowdhury, founding member of BERN also spoke at the event.