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Analyzing Cycles in Remittances and Foreign Direct Investment: Evidence from the Philippines

Author

Listed:
  • Puneet Vatsa
  • Sokchea Lim
  • Hem C. Basnet

    (Lincoln University, New Zealand)

Abstract

This paper is devoted to analyzing the associations between business cycles, remittances, and foreign direct investment (FDI), using data from the Philippines. First, we use the Hamilton filter to isolate the cyclical components of the three variables; then, we use time-difference analyses to examine whether remittances and FDI are acyclical, procyclical, or countercyclical. The results show that remittances are procyclical and move contemporaneously with business cycles. However, the evidence regarding the cyclicality of FDI is mixed. Furthermore, FDI and remittances are uncorrelated. Our findings do not support the view that remittances are motivated by altruism; instead, they suggest that a profit motive drives remittances.

Suggested Citation

  • Puneet Vatsa & Sokchea Lim & Hem C. Basnet, 2022. "Analyzing Cycles in Remittances and Foreign Direct Investment: Evidence from the Philippines," Review of Development Finance Journal, Chartered Institute of Development Finance, vol. 12(2), pages 10-17.
    • Handle: RePEc:afj:journ3:v:12:y:2022:i:2:p:10-17
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    File URL: https://journals.co.za/doi/abs/10.10520/ejc-rdfin_v12_n2_a2
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    More about this item

    Keywords

    Remittances; foreign direct investment; business cycles; Philippines;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances

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