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Do Worker Remittances Reduce Output Volatility in Developing Countries?

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  • Chami Ralph

    (International Monetary Fund)

  • Hakura Dalia S.

    (The International Monetary Fund)

  • Montiel Peter J.

    (Williams College)

Abstract

The theoretical and empirical effects of remittance inflows on output volatility are ambiguous. On the one hand, remittances have been remarkably stable compared to other inflows, and they seem to be compensatory in nature, rising when the home country’s economy suffers a downturn. On the other hand, the labor supply effects induced by altruistic remittances could cause the output effects associated with technology shocks to be magnified. Based on a sample of 70 remittance-recipient countries, we find that remittances have a negative effect on output growth volatility, thereby supporting the notion that remittance flows are a stabilizing influence on output.

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Bibliographic Info

Article provided by De Gruyter in its journal Journal of Globalization and Development.

Volume (Year): 3 (2012)
Issue (Month): 1 (June)
Pages: 1-25

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Handle: RePEc:bpj:globdv:v:3:y:2012:i:1:n:2

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References

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  1. Geert Bekaert & Campbell R. Harvey & Christian Lundblad, 2004. "Growth Volatility and Financial Liberalization," NBER Working Papers 10560, National Bureau of Economic Research, Inc.
  2. Jihad Dagher & Ralph Chami & Peter Montiel & Yasser Abdih, 2008. "Remittances and Institutions," IMF Working Papers 08/29, International Monetary Fund.
  3. Matteo Bugamelli & Francesco Paternò, 2008. "Output growth volatility and remittances," Temi di discussione (Economic working papers) 673, Bank of Italy, Economic Research and International Relations Area.
  4. Miklos Koren & Silvana Tenreyro, 2003. "Diversification and development," Working Papers 03-3, Federal Reserve Bank of Boston.
  5. Aggarwal, Reena & Demirguc-Kunt, Asli & Martinez Peria, Maria Soledad, 2006. "Do workers'remittances promote financial development ?," Policy Research Working Paper Series 3957, The World Bank.
  6. Dalia S. Hakura, 2009. "Output Volatility in Emerging Market and Developing Countries: What Explains the “Great Moderation” of 1970-2003?," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 59(3), pages 229-254, August.
  7. Neagu , Ileana C. & Schiff, Maurice, 2009. "Remittance stability, cyclicality and stabilizing impact in developing countries," Policy Research Working Paper Series 5077, The World Bank.
  8. Furceri, Davide & Karras, Georgios, 2007. "Country size and business cycle volatility: Scale really matters," Journal of the Japanese and International Economies, Elsevier, vol. 21(4), pages 424-434, December.
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Citations

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Cited by:
  1. 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.
  2. Eduardo Fernández Arias & Eduardo Levy-Yeyati, 2010. "Global Financial Safety Nets: Where Do We Go from Here?," Business School Working Papers 2010-06, Universidad Torcuato Di Tella.
  3. Carl Davidson & Nicholas Sly, 2013. "A Simple Model of Globalization, Schooling and Skill Acquisition," CESifo Working Paper Series 4394, CESifo Group Munich.
  4. Mthuli Ncube & Zuzana Brixiova, 2013. "Working Paper 188 - Remittances and their Macroeconomic Impact: Evidence from Africa," Working Paper Series 996, African Development Bank.
  5. Eller, Markus & Fidrmuc, Jarko & Fungácová , Zuzana, 2013. "Fiscal policy and regional output volatility: Evidence from Russia," BOFIT Discussion Papers 13/2013, Bank of Finland, Institute for Economies in Transition.

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