Remittance Stability, Cyclicality and Stabilizing Impact in Developing Countries

That remittances are a stable source of external finance seems to have become the received wisdom. In addition, many studies have found remittances to behave counter-cyclically, increasing during crises and times of hardship for the recipient countries. Are remittances reliable macroeconomic stabilizers? To answer this question, the present study examines the stability, cyclicality, and stabilizing impact of remittances in comparison with the same three features for other foreign-exchange inflows, namely foreign direct investment and official development aid. The analysis is performed at the country and regional levels rather than at the aggregate or global level (on which much of the received wisdom rests), because policymakers are concerned with the impact of remittances in their country rather than at the global level. The main findings for 1980-2007 are that in a majority of countries: i) official development aid is more stable than remittances, and remittances are more stable than foreign direct investment; ii) official development aid is counter-cyclical, while remittances are pro-cyclical, although less so than foreign direct investment; and iii) official development aid is stabilizing and remittances are destabilizing, although less so than foreign direct investment. The paper suggests that it is necessary to examine counter-cyclicality separately from the stabilizing impact, as the former does not seem to always imply the latter.

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Bibliographic Details
Main Authors: Neagu, Ileana C., Schiff, Maurice
Language:English
Published: 2009-10-01
Subjects:ACCOUNTING, AMOUNTS OF REMITTANCES, BALANCE OF PAYMENTS, BALANCE OF PAYMENTS STATISTICS, BANK POLICY, BRAIN DRAIN, BUSINESS CYCLE, BUSINESS CYCLES, CAPITAL FLOWS, CAPITAL INFLOW, CAPITAL INFLOWS, COMPENSATION OF EMPLOYEES, CORRELATION COEFFICIENT, CORRELATION COEFFICIENTS, COST REDUCTIONS, CURRENCY, CURRENCY CRISES, CURRENT ACCOUNT BALANCES, CYCLICAL MOVEMENTS, DETERMINANTS OF REMITTANCES, DEVELOPING COUNTRIES, DEVELOPMENT ECONOMICS, DEVELOPMENT FINANCE, DIRECT IMPACT OF REMITTANCES, ECONOMIC ACTIVITY, ECONOMIC CRISES, ECONOMIC DEVELOPMENT, ECONOMIC HARDSHIP, ECONOMIC IMPLICATIONS, ECONOMIC OUTLOOK, ECONOMIC RESEARCH, ECONOMIC SIZE, ECONOMICS RESEARCH, EFFECTS OF REMITTANCES, EMIGRANT REMITTANCES, EQUITY CAPITAL, EVOLUTION OF REMITTANCES, EXTERNAL FINANCE, EXTERNAL FINANCING, FINANCIAL CRISES, FINANCIAL DEVELOPMENT, FINANCIAL FLOWS, FINANCIAL SYSTEMS, FLUCTUATIONS, FOREIGN CAPITAL, FOREIGN DIRECT INVESTMENT, FOREIGN EXCHANGE, FUTURE PROSPECTS, GDP, GDP DEFLATOR, GLOBAL DEVELOPMENT FINANCE, GLOBAL ECONOMIC PROSPECTS, GLOBAL REMITTANCE, GLOBAL REMITTANCES, GLOBALIZATION, GROWTH VOLATILITY, HOME COUNTRY, IMPACT OF REMITTANCES, INCOME, INCOME GROUP, INCOME GROUPS, INCOME LEVEL, INCREASE IN REMITTANCES, INFLATION, INFORMAL CHANNELS, INFORMAL REMITTANCES, INSURANCE, INTERNATIONAL BANK, INTERNATIONAL MIGRATION, INTERNATIONAL MONETARY FUND, INTERNATIONAL REMITTANCES, INVESTMENT OPPORTUNITIES, LIQUIDITY, LIQUIDITY CONSTRAINTS, LOW INCOME, LOW INCOME COUNTRIES, MACROECONOMIC DETERMINANTS, MACROECONOMIC EFFECTS, MACROECONOMIC INDICATORS, MACROECONOMIC SHOCKS, MIDDLE INCOME, MIDDLE INCOME COUNTRIES, MIDDLE-INCOME COUNTRIES, MIGRANT WORKERS, MIGRANTS, MORAL HAZARD, NATURAL DISASTER, NATURAL DISASTERS, OFFICIAL REMITTANCE, OFFICIAL REMITTANCE DATA, OUTPUT, OUTPUT PER CAPITA, OUTPUT VOLATILITY, OVERSEAS MIGRANTS, PARTICULAR COUNTRY, PORTFOLIO, POSITIVE COEFFICIENT, PRIVATE CAPITAL, PRIVATE CAPITAL FLOWS, RAPID GROWTH, REAL GDP, RECIPIENT COUNTRIES, RECIPIENT HOUSEHOLDS, REMITTANCE, REMITTANCE DATA, REMITTANCE FLOWS, REMITTANCE INFLOWS, REMITTANCE RECEIPTS, REMITTANCES, REMITTANCES FLOWS, RETURN, RISK REDUCTION, SAVINGS, SKILLED MIGRANTS, STANDARD DEVIATION, UTILITY FUNCTION, WORKER REMITTANCES, WORLD DEVELOPMENT INDICATORS,
Online Access:http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20091014134511
https://hdl.handle.net/10986/4269
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