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Rainfall, Financial Development, and Remittances: Evidence from Sub-Saharan Africa

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  • Rabah Arezki

    ()
    (International Monetary Fund (IMF))

  • Markus Bruckner

    ()
    (School of Economics, University of Adelaide)

Abstract

We use annual variations in rainfall to examine the effects that exogenous, transitory income shocks have on remittances in a panel of 41 Sub-Saharan African countries during the period 1970-2007. Our main finding is that on average rainfall shocks have an insignificant contemporaneous effect on remittances. However, the marginal effect is significantly decreasing in the share of domestic credit to GDP. So much so, that at high levels of credit to GDP rainfall shocks have a significant negative effect on remittances, while at low levels of credit to GDP the effect of rainfall on remittances is significantly positive.

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File URL: http://www.economics.adelaide.edu.au/research/papers/doc/wp2011-30.pdf
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Bibliographic Info

Paper provided by University of Adelaide, School of Economics in its series School of Economics Working Papers with number 2011-30.

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Length: 31 pages
Date of creation: Sep 2011
Date of revision:
Handle: RePEc:adl:wpaper:2011-30

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Web page: http://www.economics.adelaide.edu.au/
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Keywords: Transitory Income Shocks; Remittances; Financial Development;

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References

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  1. Salvador Barrios & Luisito Bertinelli & Eric Strobl, 2010. "Trends in Rainfall and Economic Growth in Africa: A Neglected Cause of the African Growth Tragedy," The Review of Economics and Statistics, MIT Press, vol. 92(2), pages 350-366, May.
  2. Dilip Ratha & William Shaw, 2007. "South-South Migration and Remittances," World Bank Publications, The World Bank, number 6733, August.
  3. Dean Yang, 2006. "Coping with Disaster: The Impact of Hurricanes on International Financial Flows, 1970-2002," NBER Working Papers 12794, National Bureau of Economic Research, Inc.
  4. HwaJung Choi, 2007. "Are Remittances Insurance? Evidence from Rainfall Shocks in the Philippines," World Bank Economic Review, World Bank Group, World Bank Group, vol. 21(2), pages 219-248, May.
  5. Rabah Arezki & Markus Bruckner, 2011. "Rainfall, Financial Development, and Remittances: Evidence from Sub-Saharan Africa," School of Economics Working Papers, University of Adelaide, School of Economics 2011-30, University of Adelaide, School of Economics.
  6. Edward Miguel & Shanker Satyanath & Ernest Sergenti, 2004. "Economic Shocks and Civil Conflict: An Instrumental Variables Approach," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 112(4), pages 725-753, August.
  7. Antonio Ciccone, 2011. "Economic Shocks and Civil Conflict: A Comment," American Economic Journal: Applied Economics, American Economic Association, American Economic Association, vol. 3(4), pages 215-27, October.
  8. Markus Brückner & Kerstin Gerling & Hans Grüner, 2010. "Wealth inequality and credit markets: evidence from three industrialized countries," Journal of Economic Growth, Springer, Springer, vol. 15(2), pages 155-176, June.
  9. Gupta, Sanjeev & Pattillo, Catherine A. & Wagh, Smita, 2009. "Effect of Remittances on Poverty and Financial Development in Sub-Saharan Africa," World Development, Elsevier, Elsevier, vol. 37(1), pages 104-115, January.
  10. Freund, Caroline & Spatafora, Nikola, 2008. "Remittances, transaction costs, and informality," Journal of Development Economics, Elsevier, Elsevier, vol. 86(2), pages 356-366, June.
  11. Cynthia Bansak & Brian Chezum, 2009. "How Do Remittances Affect Human Capital Formation of School-Age Boys and Girls?," American Economic Review, American Economic Association, American Economic Association, vol. 99(2), pages 145-48, May.
  12. Rabah Arezki & Markus Bruckner, 2011. "Rainfall, Financial Development, and Remittances," IMF Working Papers 11/153, International Monetary Fund.
  13. Acosta, Pablo A. & Lartey, Emmanuel K.K. & Mandelman, Federico S., 2009. "Remittances and the Dutch disease," Journal of International Economics, Elsevier, Elsevier, vol. 79(1), pages 102-116, September.
  14. Catalina Amuedo-Dorantes & Susan Pozo, 2006. "Migration, Remittances, and Male and Female Employment Patterns," American Economic Review, American Economic Association, American Economic Association, vol. 96(2), pages 222-226, May.
  15. Serdar Sayan, 2006. "Business Cycles and Workers' Remittances," IMF Working Papers 06/52, International Monetary Fund.
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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, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences 93, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  2. repec:ipg:wpaper:17 is not listed on IDEAS
  3. Brückner, Markus & Gradstein, Mark, 2013. "Effects of Transitory Shocks to Aggregate Output on Consumption in Poor Countries," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9658, C.E.P.R. Discussion Papers.
  4. Rabah Arezki & Markus Bruckner, 2011. "Rainfall, Financial Development, and Remittances: Evidence from Sub-Saharan Africa," School of Economics Working Papers, University of Adelaide, School of Economics 2011-30, University of Adelaide, School of Economics.
  5. Lin, Faqin & Sim, Nicholas C.S., 2014. "Baltic Dry Index and the democratic window of opportunity," Journal of Comparative Economics, Elsevier, vol. 42(1), pages 143-159.
  6. Unbreen Qayyum & Muhammad Nawaz, 2014. "Remittances and Economic Growth: The Role of Financial Development," PIDE-Working Papers, Pakistan Institute of Development Economics 2014:100, Pakistan Institute of Development Economics.
  7. Luca Marchiori & Jean-Francois Maystadt & Ingmar Schumacher, 2013. "Is environmentally-induced income variability a driver of migration? A macroeconomic perspective," Working Papers, Department of Research, Ipag Business School 2013-017, Department of Research, Ipag Business School.
  8. von Hagen, Jürgen & Zhang, Haiping, 2014. "Financial development, international capital flows, and aggregate output," Journal of Development Economics, Elsevier, Elsevier, vol. 106(C), pages 66-77.

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