A Study On Determinants And Trends In Remittance Flows In Macedonia

Labor migration and remittances have become increasingly important for many developing and transition countries in recent decades. In the case of Macedonia, labor migration has a long history, going back for a century or even more. Yet, remittance flows have ignited considerable interest within the academic and policy community in the last few years, as net private transfers in Macedonia increased from 565.75 Millions of EUR in 2003 to 923.07 Millions of EUR in 2006. Despite the high level of remittances, little is known about the sources of remittances (or the main source countries of remittance transfers), the demographic and educational profile of senders and recipient households, the final use of remittance inflows (household consumption, investments or savings), the role of the formal financial sector, the link between remittances and financial development and the prospective trends. Without proper survey data, accurate estimation of remittance flows and how they are impacting the economy is not possible. No surveys or other in-depth analyses have been conducted in Macedonia on this topic so far. Moreover, the link between migration movements and developments in remittance receipts has not yet been properly analyzed. The official estimate of remittance inflows in Macedonia was $181.45 millions of US $ in 2006, whereas our alternative estimate equals roughly 301.8 millions of US $. Therefore, the true importance of remittances to the Macedonian economy is much higher that the ratio of official remittances to GDP. In addition to shedding light on the size and importance of remittances in Macedonia, we believe that the insights gained on how remittance data are used will be useful to policymakers and donor community.