Do Remittances Cause Inflation? Long-Run Evidence from Tajikistan

This paper examines how remittances (REM) affect inflation in Tajikistan from Q4 of 2004 to Q4 of 2022, using the autoregressive distributed lag bounds test for the long-term effects of REM, government spending (GE[Q2.1][DBK2.2]), money supply (MS), exchange rate (EXR), growth and investment (INV) on inflation. Results indicate REM increase inflation by 0.22%, while GE reduces it by 1.7%. Both GE and MS significantly lower inflation; REM, EXR and growth tend to raise it. The INV’s effect is insignificant. The study contributes country-specific insights on inflation dynamics in a remittance-dependent, post-Soviet economy, highlighting the roles of REM, fiscal policy and EXRs within Tajikistan’s context. It also employs a machine learning method, random forest (RF), to evaluate predictive feature importance, capturing non-linear associations often missed by linear models. These RF results are presented as predictive insights rather than as evidence of structural causality.