Impact of COVID-19 on migrant remittances in South Asia

This paper investigates the impact of COVID-19 on remittance flows to South Asia. Using a monthly panel data set of five South Asian countries (namely Bangladesh, India, Nepal, Pakistan, and Sri Lanka) for the period January 2020 to August 2021. This study, applying the pooled ordinary least square estimation method, generally, finds a positive impact of COVID-19 on remittance flows to South Asia. Further investigation reveals the existence of a non-linear (inverted U-shaped) relationship between COVID-19 cases and remittances. This means that with the initial covid spread leading to temporary restrictions affecting economic activity in home countries, remittances start increasing to support families’ income and consumption affected by the regulations. However, the very high levels of infection rates leading to continued lockdowns in home countries decrease the incentives for investment with substantially reduced economic activities, thus decreasing aggregate remittances. We found similar results when replacing infection rates with deaths from COVID-19. However, increasing COVID-19 infection rates and deaths in migrants’ host countries reduce remittances to migrants’ home countries.