Paranamana, G. P.2025-11-252025-11-252018-11-09Peradeniya International Economics Research Symposium (PIERS) – 2018, University of Peradeniya, P 35 - 38978955589253723861568https://ir.lib.pdn.ac.lk/handle/20.500.14444/6982Introduction The recent period witnesses a steady inflow of remittances to developing countries. Their flows to developing countries contribute the second largest source of external finance after foreign direct investment (FDI) (Ahamada and Coulibaly, 2013) and are about three times larger than official development assistance (Wolrd Bank, 2015). Officially recorded remittances to developing countries were ＄435 billion in 2014, an increase of 5 percent over 2013. Total remittance flows to developing countries have increased more than six–fold during the period 1995 to 2015 amounting to ＄454 billion in 2015 (World Bank, 2015). Remittances have a potential positive impact as a development tool for the recipient countries. The development effects of remittances can be decomposed into its impact on savings, investments, growth, consumption, and poverty and income distribution. The impact on growth of remittances in the receiving economies is likely to act through savings and investment as well as short-run effects on aggregate demand and output through consumption. Workers‘ remittances are a component of foreign savings and they complement national savings by increasing the total pool of resources available for investments (Solimano, 2003). According to the literature, some researchers have found that when people migrate - especially females – that has a negative impact on society (Lipton, 2002). On the other hand, others perceive workers‘ remittances as having a significant positive impact on the economic situation (Ratha, 2003). Although the evidence on the effect of remittances on long-term growth remains inconclusive, in economies where the financial system is underdeveloped, remittances appear to alleviate credit constraints and may stimulate economic growth, via financing education and health and increasing investments. Some analysts and scholars argue that remittance benefits are only felt at the individual receiver level, but some case studies suggest that the benefits of remittances to individuals have spill-over effects that can translate into a positive impact on the local economy (Carrasco and Ro, 2007). However there is no clear direction between remittances and GDP per capita in Sri Lanka.enRemittancesGrowthDeveloping CountriesSri LankaArticle