Remittances in Post-Soviet countries: Econometric research for Armenia

Abstract

This study investigates the role of personal remittances in post-Soviet economies, with a particular focus on Armenia’s economic development. In several post-Soviet countries, where remittances exceed 30% of GDP, they have become a crucial factor influencing economic stability, social welfare, and political security. The statistical analysis indicates significant heterogeneity across these economies: in Central Asian countries, remittances are an essential source of household income; in Russia, Kazakhstan, and the Baltic states, their role is relatively minor; while in the South Caucasus and Moldova, they represent a key driver of economic activity and investment. For Armenia, the study estimates the impact of personal remittances, gross investment, and private consumption on economic growth using quarterly data for the period 1996–2024. Two multiple regression models were specified and estimated: the first using the Ordinary Least Squares (OLS) method, and the second addressing potential endogeneity issues through the Two-Stage Least Squares (TSLS) approach. The empirical findings suggest that personal remittances have no statistically significant short-run effect on economic growth in Armenia. In contrast, private consumption and gross investment make a positive and statistically significant contribution to economic growth. The results of this analysis may provide valuable insights for post-Soviet policymakers seeking to reduce reliance on external remittances and redirect these inflows toward productive investment.