In any developing country, shortage of foreign exchange reserve, which is very essential to pay the import bills, is a common problem. Bangladesh, which depends more on remittances to pay its import bills, is not an exception. Over the last decade, the workers’ remittances played a crucial role in the economic development of the country. This paper examines the determinants of remittances in the economy of Bangladesh. Using econometric techniques, this study finds that factors like GDP, crude petroleum price and exchange rate have a significant positive impact on the remittance inflow in Bangladesh.

Remittances are unrequited non-market personal transfers between households across countries which differ from official aid flows (Chami et al., 2008). Generally, the money transferred by an individual working in a foreign country (migrant) to his relatives in his home country is referred to as remittance. The remittances received by Bangladesh constitute a significant percent of its GDP.

There are two main approaches to analyzing remittances: ‘portfolio’ approach and altruism approach (IMF, 2005, p. 78). The portfolio approach considers remittances as a self-interest controlled capital transfer to diversify the migrant’s savings. Portfolio motives come out of investment opportunities and saving differentiation, while the altruistic approach considers remittances as a transaction that benefits the receivers who were left behind by the migrant. Some macroeconomic factors such as home and host countries’ GDP, exchange rate, interest rate, inflation, crude oil price in international market, wage rate, number of migrants and the relative rates of return of different financial and real assets may affect the flow of remittances.