Booming remittances inflow to south Asian economies have become significant source of foreign finance after Foreign Direct Investment (FDI). This paper presents the relationships between remittances and Household Consumption Volatility for five main south Asian economies India, Bangladesh, Pakistan, Nepal and Sri Lanka from 1975 to 2010. The Panel Generalized Method of Moments (GMM) has employed for control endogeniety of variables. The results show that remittances are responsible for diminishing consumption volatility. The main policy implication based on our finding is that financial sector should be improved for diminishing consumption volatility.

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