Nexus between remittance, trade openness and inequality in South Asian countries: New evidence from the nonlinear unit root, nonlinear OLS, and NARDL, and asymmetry causality test

Resumen

This study’s motivation is to explore the pattern of the relationship between Remittance, Trade openness, and Inequality of selected south Asian countries for the 1976-2018 periods. Postulating their relationship, the study performed several nonlinear tests, including unit root tests, nonlinearity applying OLS and test of BDS, nonlinear autoregressive distributed lagged (NARDL), and asymmetry causality test. Study findings with nonlinear unit root tests suggested that the research variables follow the nonlinear process of becoming stationary from nonstationary. The results of Nonlinear OLS and test of BDS confirm the existence of nonlinearity among research variables. The result of the Wald test in NARLD confirms the availability of asymmetric links among variables. Likewise, considering the results of NARDL, it is apparent that there a long-run asymmetric relationship between remittance, trade openness, and inequality. Findings suggest that both positive and negative shocks in remittance and tread openness are critical to either instituting or vexing the present state of the economy in the long term. The results  of the directional relationship with asymmetry causality test, we observed that the feedback hypothesis hold in case of positive shocks in remittance and trade openness towards inequality.