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Output Growth Volatility and Remittances

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  • MATTEO BUGAMELLI
  • FRANCESCO PATERNÒ

Abstract

Since output growth volatility has negative effects on growth, poverty and welfare, especially in poorer countries, it is crucial to identify the country-specific factors that affect it. The empirical literature has focused mostly on financial development, policy distortions and globalization variables. Among the latter, attention has been directed in particular to trade and financial openness. We contribute to this literature by adding what we see as the missing globalization variable, the one related to the increasingly important phenomenon of international migrations, namely emigrants' remittances. Remittances can help reduce output growth volatility thanks to their considerable magnitude, stability and low pro-cyclicality. Applying an empirical framework taken from the existing literature to a sample of about 60 emerging and developing economies over the period 1980-2003, we provide robust evidence that remittances are negatively correlated to output growth volatility. Instrumental variable estimation supports our intuition about the direction of causality.

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Bibliographic Info

Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 78 (2011)
Issue (Month): 311 (07)
Pages: 480-500

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Handle: RePEc:bla:econom:v:78:y:2011:i:311:p:480-500

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References

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  1. Giuliano, Paola & Ruiz-Arranz, Marta, 2009. "Remittances, financial development, and growth," Journal of Development Economics, Elsevier, vol. 90(1), pages 144-152, September.
  2. Adams, Richard H. Jr., 2005. "Remittances, household expenditure and investment in Guatemala," Policy Research Working Paper Series 3532, The World Bank.
  3. David McKenzie & Hillel Rapoport, 2006. "Migration and Education Inequality in Rural Mexico," IDB Publications 9392, Inter-American Development Bank.
  4. Claudia Martínez Alvear & Dean Yang, 2007. "Remittances and Poverty in Migrants’ Home Areas: Evidence from the Philippines," Working Papers wp257, University of Chile, Department of Economics.
  5. Dean Yang, 2008. "International Migration, Remittances and Household Investment: Evidence from Philippine Migrants' Exchange Rate Shocks," Economic Journal, Royal Economic Society, vol. 118(528), pages 591-630, 04.
  6. Richard H. Adams, Jr. & John Page, 2003. "International migration, remittances, and poverty in developing countries," Policy Research Working Paper Series 3179, The World Bank.
  7. Rapoport, Hillel & Docquier, Frédéric, 2005. "The Economics of Migrants’ Remittances," IZA Discussion Papers 1531, Institute for the Study of Labor (IZA).
  8. Taylor, J. Edward & Mora, Jorge & Adams, Richard H., Jr. & Lopez-Feldman, Alejandro, 2005. "Remittances, Inequality and Poverty: Evidence from Rural Mexico," Working Papers 60287, University of California, Davis, Department of Agricultural and Resource Economics.
  9. McCormick, Barry & Wahba, Jackline, 2001. "Overseas Work Experience, Savings and Entrepreneurship amongst Return Migrants to LDCs," Scottish Journal of Political Economy, Scottish Economic Society, vol. 48(2), pages 164-78, May.
  10. Edwards, Alejandra Cox & Ureta, Manuelita, 2003. "International migration, remittances, and schooling: evidence from El Salvador," Journal of Development Economics, Elsevier, vol. 72(2), pages 429-461, December.
  11. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
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Citations

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Cited by:
  1. Matteo Bugamelli & Francesco Paternò, 2006. "Do Workers' Remittances Reduce the Probability of Current Account Reversals?," CEP Discussion Papers dp0714, Centre for Economic Performance, LSE.
  2. Bentour, El Mostafa, 2013. "Should Moroccan Officials Depend on the Workers’ Remittances to Finance the Current Account Deficit?," MPRA Paper 52290, University Library of Munich, Germany, revised 01 May 2013.
  3. Giulia Bettin & Andrea Filippo Presbitero & Nikola Spatafora, 2014. "Remittances and vulnerability in developing countries," Mo.Fi.R. Working Papers 93, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  4. Ralph Chami & Dalia Hakura & Peter Montiel, 2010. "Do Worker Remittances Reduce Output Volatility in Developing Countries?," Center for Development Economics 2010-01, Department of Economics, Williams College.
  5. Christian EBEKE, 2010. "Transferts des migrants, ouverture sur l'extérieur et dépenses publiques dans les pays en développement," Working Papers 201011, CERDI.
  6. Jean-Louis Combes & Christian Ebeke, 2011. "Remittances and Household Consumption Instability in Developing Countries," Working Papers halshs-00552245, HAL.
  7. Sarah Jacobson & Ragan Petrie, 2010. "Favor Trading in Public Good Provision," Department of Economics Working Papers 2010-19, Department of Economics, Williams College, revised Apr 2013.
  8. Klomp, Jeroen & de Haan, Jakob, 2009. "Political institutions and economic volatility," European Journal of Political Economy, Elsevier, vol. 25(3), pages 311-326, September.
  9. TCHAMANBÉ DJINÉ Louise, TDL & MIAMO WENDJI Clovis, MWC, 2012. "Transferts Financiers des Migrants et développement en Afrique subsaharienne," MPRA Paper 38139, University Library of Munich, Germany.
  10. Rémi Generoso, 2012. "Transferts de fonds et résilience des pays d'Afrique de l'Ouest face à la variabilité des précipitations : une perspective macroéconomique," Working Papers hal-00830021, HAL.
  11. Faruk Balli & Faisal Rana, 2014. "Determinants of risk sharing through remittances: cross-country evidence," CAMA Working Papers 2014-12, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  12. Magnusson, Kristin, 2009. "The Impact of U.S. Regional Business Cycles on Remittances to Latin America," Working Paper Series in Economics and Finance 710, Stockholm School of Economics.
  13. James Dzansi, 2013. "Do remittance inflows promote manufacturing growth?," The Annals of Regional Science, Springer, vol. 51(1), pages 89-111, August.

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