98
l
POONAM GUPTA AND KARAN SINGH
Dickey-Fuller tests indicate that the remittances are trend stationary. We are using quarterly data, so we include quarterly dummies in the regression to deseasonalize the data. Durbin-Watson tests, and the alternative Durbin-Watson tests, show that there is serial correlation of order 1 in the regressions; thus we report our estimates correcting the standard errors for serial correlation and possible heterogeneity using the NeweyWest estimates. Table 7.3 estimates the trend growth rate of remittances and the seasonal patterns. In column I, we include an annual trend, which shows the average pace of growth of remittances in constant dollars to be about 11 percent a year. In column II, we allow the trend to be different from 2004 and find that the pace of growth of remittances has accelerated by 3 percentage points from 2004 (which is marginally significant). In columns III–V we include a quarterly trend and quarterly dummies to detect seasonality. We find the estimate of trends to be similar to the annual one; we also find that there is indeed acceleration in remittances since 2004 and that there is no seasonality in the remittance flows, as shown by the insignificant coefficients of quarterly dummies. Next, drawing on the existing literature on the regressions, we include a comprehensive set of domestic and external variables as the potential determinants of remittances (Gordon and Gupta 2004; Gupta 2006, 2010). The demand for remittances is likely to be influenced by the economic conditions in the recipient countries, and thus we include gross domestic product (GDP) growth as a measure of the economic strength.2 The
TABLE 7.3 Trend in Remittances dependent variable: log remittances in constant dollars Variable
III
IV
V
Quarterly trend from 1992
0.024*** [12.95]
0.027*** [23.73]
0.024*** [12.86]
Quarterly trend from 2004
0.009* [1.79]
Annual trend from 1992
I
II
0.108*** [24.15]
0.098*** [12.64]
Annual trend from 2004
0.031 [1.62]
0.009* [1.72]
Dummy for Quarter 1
0.07 [0.96]
0.06 [0.92]
Dummy for Quarter 2
0.09 [1.28]
0.09 [1.24]
Dummy for Quarter 3
0.06 [0.79]
0.05 [0.73]
Observations R
2
75
75
75
75
75
0.89
0.89
0.89
0.89
0.89
Source: Authors’ calculations. Note: Standard errors are given in brackets. *, **, *** indicate that the coefficients are significant at the 10, 5, and 1 percent levels, respectively.