THRESHOLD EFFECTS IN MACROECONOMIC RELATIONSHIPS: ANALYSING REAL AND NOMINAL REMITTANCE OUTFLOWS

Abstract This study investigates the non-linear dynamics between remittance outflows and key macroeconomic indicators in Gulf Cooperation Council (GCC) countries, utilizing a threshold regression model to uncover distinctive threshold effects. The research builds on the premise that the impact of remittances on macroeconomic indicators is non-linear and varies across different levels of economic development, informed by previous studies on remittance flows, macroeconomic impacts, and threshold models. Employing secondary data from 1960 to 2023, the study uses threshold regression models to analyze the relationship between remittance outflows and macroeconomic indicators, considering different threshold levels to capture non-linear dynamics. The analysis reveals limited evidence of significant non-linear relationships within the examined thresholds, suggesting that the impact of remittances varies insignificantly across different levels of economic development within the GCC context. This research sheds light on the nuanced role of remittances in economic development, offering implications for policymakers in crafting remittance-related policies. It highlights the importance of considering the unique economic contexts of GCC countries when evaluating the impact of remittances. This research contributes to the understanding of the complex role of remittances in GCC economies by employing a threshold analysis approach, offering insights for policymakers on optimizing the economic benefits of remittance flows.