International Social Science Journal (Chinese Edition)

No.4, 2021

The causal relationship between remittance and poverty in South Africa: a multivariate approach

(Abstract)

Mercy T. Musakwa and Nicholas M. Odhiambo

The main objective of this study is to investigate the causality between international remittance inflows and poverty in South Africa using time series data from 1980 to 2017. The study was motivated by the increasing role of remittances in poverty reduction and human development on the one hand, and the burgeoning inflow of remittances on the other hand. Since 1998, South Africa remittance inflows have shown a more or less upward trend. As an example, in 1998, the country recorded an increase in remittance inflows of 18.5 per cent and later maintained a steady increase in remittance inflows with an average increase of 25.3 per cent during the period from 1999 to 2017. Using a multivariate Granger causality model, our results show that there is a distinct unidirectional causal flow from poverty to remittances in the short term when the infant mortality rate is used as a proxy for poverty. However, when household consumption expenditure is used as a proxy, no causality is found to prevail in both the short and the long term. Policy implications are discussed.