A research work of the Bangladesh Bank (BB) has found that the country's high inflation has positive relationship with its remittance earning.

The positive relationship implies that higher inflation in home country, which reduces the purchasing power of migrants' families, induced the migrants to send more remittance to Bangladesh.

Interestingly, the country's remittance earning has been growing along with high inflationary pressure on the economy over the last few years.

The study said if domestic inflation goes up by 1.0 per cent, remittance inflow increases by 0.29 per cent.

The research, coordinated by Ahsan H Mansur, executive director of Policy Research Institute of Bangladesh (PRI), used monthly remittance data from 1980 to 2011.

The study used data of the Bangladesh Bank, the Bangladesh Bureau of Statistics, the Ministry of Finance, and the Bureau of Manpower, Employment and Training.

Mr Ahsan said: "The relationship between inflation and remittance inflow should be positive, and our study has found the same."

Remittance, which emerged as the key driver of economic growth, can help improve the country's development prospects, maintain macro-economic stability, and mitigate impact of adverse shocks.

Nurunaher, a joint director of the BB research unit and a researcher of the study, told the FE: "Remittance is very sensitive to inflation."

She, however, said abnormally high inflation might decrease remittance inflow, as it represents more risk and uncertainty in the home country, comparing with the host countries.

The aim of the study, recently released by the central bank, was to investigate whether the macro-economic variables of the home and host countries can affect the remittance inflow to Bangladesh.

The researchers said it is really tough for the country to maintain the rising trend of remittance in the face of low wages as well as the decreasing demand of migration in the labour importing nations, mostly the Middle-East countries.

The study suggested that Bangladesh has to strive hard to maintain its commendable liaison record with the labour-importing countries, especially the Middle-Eastern ones and Malaysia.

The other factors to affect remittance earnings are exchange rate, wage rate, and regulatory as well institutional arrangements, made by the government.

However, another study, conducted by Palli-Karma Sahayak Foundation (PKSF), found that there is negative relation between inflation and remittance.

One more study, conducted by leading manpower exporting country Mexico, also found that there is little relationship between inflation and remittance.

Financial Express/Bangladesh/ 4th April 2012