Sustaining household consumption through remittances in Somalia from a time-series perspective

In fragile and aid-dependent economies like Somalia, household consumption serves as a vital indicator of welfare but remains underexplored at the macro level. This study investigates the long- and short-run effects of official development assistance (ODA), population growth, GDP per capita, remittances, and trade openness on household consumption from 1980 to 2022. Using time-series analysis, the results confirm a stable long-run relationship among the variables. GDP per capita and population growth are the strongest long-run drivers, while remittances and trade openness exert significant positive effects in both the short and long run. Development aid shows a delayed impact, influencing consumption only over time. Granger causality tests reveal bidirectional causality between GDP per capita and consumption, and unidirectional effects from remittances and trade openness to consumption. The findings highlight the importance of enhancing formal remittance channels, aligning aid with household needs, investing in population-responsive infrastructure, and leveraging trade liberalization to lower essential goods’ costs. Overall, the study provides rare macro-level evidence from Somalia, offering policy guidance for strengthening household resilience and inclusive growth in fragile states.