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Corresponding Author:
Mercy T. Musakwa, Department of Economics, University of South Africa, Pretoria, South Africa

The Dynamic Causal Relationship between Remittances, Fertility and Unemployment in South Africa

September 21, 2023
JEL classification: I10; O15; O50
Keywords: South Africa; Fertility; Unemployment; Autoregressive Distributed Lag; Remittances

Abstract

In this study, the causal relationship between remittances, fertility and unemployment in South Africa is re-examined using annual data from 1990 to 2020. The study was motivated by the need to reconsider the nature of this relationship after a sharp increase in remittance inflows into the country. The findings from this study would inform fertility policies in South Africa. The question that this study seeks to answer is: Can remittances play a role in the lowering of fertility and unemployment levels in South Africa? Employing an autoregressive distributed lag (ARDL) approach to cointegration and the error correction model (ECM)-based causality model, the study found that there is a unidirectional causal flow from unemployment to fertility in the short run, and bidirectional causality between remittances and unemployment in both the short run and the long run. Bidirectional causality between fertility and remittances in the short run, and a unidirectional causal flow from fertility to remittances in the long run were also confirmed by the study. It can be concluded that South Africa may continue to formulate and implement policies that support remittance inflows in the battle against unemployment and high fertility rates. Policy implications are also discussed.

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The Dynamic Causal Relationship between Remittances, Fertility and Unemployment in South Africa

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Institute for International Economics of the Genoa Chamber of Commerce

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