IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_6172.html
   My bibliography  Save this paper

How does the Flow of Remittances Affect the Trade Balance of the Middle East and North Africa?

Author

Listed:
  • Mohammad Reza Farzanegan
  • Sherif Maher Hassan

Abstract

Middle Eastern and North African (MENA) economies have had the highest degree of dependency on received remittances worldwide over the last three decades. The region has also had the highest non-oil external trade balance deficit among developing countries. We examine the role of remittances in the trade balance of 11 labor-abundant MENA countries. Our panel regression analysis shows that the inflow of remittances has had an increasing effect on trade deficits by triggering import-led consumption expenditures. The results are robust after controlling for other drivers of trade deficit and fixed effects.

Suggested Citation

  • Mohammad Reza Farzanegan & Sherif Maher Hassan, 2016. "How does the Flow of Remittances Affect the Trade Balance of the Middle East and North Africa?," CESifo Working Paper Series 6172, CESifo.
    • Handle: RePEc:ces:ceswps:_6172
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp6172.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Rose, Andrew K. & Yellen, Janet L., 1989. "Is there a J-curve?," Journal of Monetary Economics, Elsevier, vol. 24(1), pages 53-68, July.
    2. Guna Raj Bhatta, 2013. "Remittanceand Trade Deficit Nexus in Nepal: A VECM Approach," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 25(1), pages 37-50, April.
    3. Koska, Onur A. & Saygin, Perihan Özge & Çağatay, Selim & Artal-Tur, Andrés, 2013. "International migration, remittances, and the human capital formation of Egyptian children," International Review of Economics & Finance, Elsevier, vol. 28(C), pages 38-50.
    4. World Bank, 2009. "From Privilege to Competition : Unlocking Private-Led Growth in the Middle East and North Africa," World Bank Publications - Books, The World Bank Group, number 13524, December.
    5. Bhattacharyya, Sambit & Hodler, Roland, 2010. "Natural resources, democracy and corruption," European Economic Review, Elsevier, vol. 54(4), pages 608-621, May.
    6. Adams, Richard H, Jr, 1991. "The Economic Uses and Impact of International Remittances in Rural Egypt," Economic Development and Cultural Change, University of Chicago Press, vol. 39(4), pages 695-722, July.
    7. Imai, Katsushi S. & Gaiha, Raghav & Ali, Abdilahi & Kaicker, Nidhi, 2014. "Remittances, growth and poverty: New evidence from Asian countries," Journal of Policy Modeling, Elsevier, vol. 36(3), pages 524-538.
    8. Bjorvatn, Kjetil & Farzanegan, Mohammad Reza, 2013. "Demographic Transition in Resource Rich Countries: A Blessing or a Curse?," World Development, Elsevier, vol. 45(C), pages 337-351.
    9. Kleibergen, Frank & Paap, Richard, 2006. "Generalized reduced rank tests using the singular value decomposition," Journal of Econometrics, Elsevier, vol. 133(1), pages 97-126, July.
    10. Marie-Ange Véganzonès-Varoudakis & Mustapha Kamel Nabli & J. Keller, 2007. "Exchange Rate Management within the Middle East and North Africa Region," Post-Print hal-00204783, HAL.
    11. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    12. Giuliano, Paola & Ruiz-Arranz, Marta, 2009. "Remittances, financial development, and growth," Journal of Development Economics, Elsevier, vol. 90(1), pages 144-152, September.
    13. Adams, Richard Jr. & Page, John, 2005. "Do international migration and remittances reduce poverty in developing countries?," World Development, Elsevier, vol. 33(10), pages 1645-1669, October.
    14. Morris Goldstein & Mohsin S. Khan, 2017. "Income and Price Effects in Foreign Trade," World Scientific Book Chapters, in: TRADE CURRENCIES AND FINANCE, chapter 1, pages 3-81, World Scientific Publishing Co. Pte. Ltd..
    15. Bjorvatn, Kjetil & Farzanegan, Mohammad Reza & Schneider, Friedrich, 2012. "Resource Curse and Power Balance: Evidence from Oil-Rich Countries," World Development, Elsevier, vol. 40(7), pages 1308-1316.
    16. Guna Raj Bhatta, 2013. "Remittanceand Trade Deficit Nexus in Nepal: A VECM Approach," NRB Economic Review, Nepal Rastra Bank, Economic Research Department, vol. 25(1), pages 37-50, April.
    17. Mr. Jacques Bouhga-Hagbe, 2004. "A Theory of Workers' Remittances with An Application to Morocco," IMF Working Papers 2004/194, International Monetary Fund.
    18. ,, 2004. "Problems And Solutions," Econometric Theory, Cambridge University Press, vol. 20(2), pages 427-429, April.
    19. Mustapha Kamel Nabli, 2007. "Breaking the Barriers to Higher Economic Growth : Better Governance and Deeper Reforms in the Middle East and North Africa," World Bank Publications - Books, The World Bank Group, number 6914, December.
    20. Mim, Sami Ben & Ali, Mohamed Sami Ben, 2012. "Through which channels can remittances spur economic growth in MENA countries?," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 6, pages 1-27.
    21. Ralph Chami & Connel Fullenkamp & Samir Jahjah, 2005. "Are Immigrant Remittance Flows a Source of Capital for Development?," IMF Staff Papers, Palgrave Macmillan, vol. 52(1), pages 55-81, April.
    22. Miguel D. Ramirez & Hari Sharma, 2009. "Remittances and Growth in Latin America: A Panel Unit Root and Panel Cointegration Analysis," Estudios Economicos de Desarrollo Internacional, Euro-American Association of Economic Development, vol. 9(1).
    23. Andrews,Donald W. K. & Stock,James H. (ed.), 2005. "Identification and Inference for Econometric Models," Cambridge Books, Cambridge University Press, number 9780521844413.
    24. Thanh Le, 2009. "Trade, Remittances, Institutions, and Economic Growth," International Economic Journal, Taylor & Francis Journals, vol. 23(3), pages 391-408.
    25. repec:wbk:wbpubs:13523 is not listed on IDEAS
    26. Biswas, Amit K. & Farzanegan, Mohammad Reza & Thum, Marcel, 2012. "Pollution, shadow economy and corruption: Theory and evidence," Ecological Economics, Elsevier, vol. 75(C), pages 114-125.
    27. Catalina Amuedo-Dorantes & Susan Pozo, 2011. "Remittances and Income Smoothing," American Economic Review, American Economic Association, vol. 101(3), pages 582-587, May.
    28. Richard P. C. Brown & Fabrizio Carmignani & Ghada Fayad, 2013. "Migrants’ Remittances and Financial Development: Macro- and Micro-Level Evidence of a Perverse Relationship," The World Economy, Wiley Blackwell, vol. 36(5), pages 636-660, May.
    29. ,, 2004. "Problems And Solutions," Econometric Theory, Cambridge University Press, vol. 20(1), pages 223-229, February.
    30. Mohsen Bahmani-Oskooee & Artatrana Ratha, 2004. "The J-Curve: a literature review," Applied Economics, Taylor & Francis Journals, vol. 36(13), pages 1377-1398.
    31. Kjetil Bjorvatn & Mohammad Reza Farzanegan, 2015. "Resource rents, balance of power, and political stability," Journal of Peace Research, Peace Research Institute Oslo, vol. 52(6), pages 758-773, November.
    32. Sasidaran Gopalan & Ramkishen S. Rajan, 2010. "External Financing in South Asia: The Remittances Option," ARTNeT Policy Briefs 23, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    33. Mohammad Reza Farzanegan, 2014. "Can oil-rich countries encourage entrepreneurship?," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 26(9-10), pages 706-725, December.
    34. Catrinescu, Natalia & Leon-Ledesma, Miguel & Piracha, Matloob & Quillin, Bryce, 2009. "Remittances, Institutions, and Economic Growth," World Development, Elsevier, vol. 37(1), pages 81-92, January.
    35. David Roodman, 2006. "How to Do xtabond2," North American Stata Users' Group Meetings 2006 8, Stata Users Group.
    36. Catalina Amuedo-Dorantes & Susan Pozo, 2004. "On the Use of Differing Money Transmission Methods by Mexican Immigrants," Economic Working Papers at Centro de Estudios Andaluces E2004/06, Centro de Estudios Andaluces.
    37. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2007. "Enhanced routines for instrumental variables/generalized method of moments estimation and testing," Stata Journal, StataCorp LP, vol. 7(4), pages 465-506, December.
    38. Anwar, Sajid & Cooray, Arusha, 2015. "Financial flows and per capita income in developing countries," International Review of Economics & Finance, Elsevier, vol. 35(C), pages 304-314.
    39. World Bank, 2016. "World Development Indicators 2016," World Bank Publications - Books, The World Bank Group, number 23969, December.
    40. Glytsos, Nicholas P, 1993. "Measuring the Income Effects of Migrant Remittances: A Methodological Approach Applied to Greece," Economic Development and Cultural Change, University of Chicago Press, vol. 42(1), pages 131-168, October.
    41. Mim, Sami Ben & Ali, Mohamed Sami Ben, 2012. "Through which channels can remittances spur economic growth in MENA countries?," Economics Discussion Papers 2012-8, Kiel Institute for the World Economy (IfW Kiel).
    42. Magda Kandil & Ida A. Mirzaie, 2008. "The Impact Of Capital and Remittance Flows on Economic Performance in MENA Countries," Working Papers 440, Economic Research Forum, revised 09 Jan 2008.
    43. World Bank, 2003. "Trade, Investment and Development in the Middle East and North Africa : Engaging with the World," World Bank Publications - Books, The World Bank Group, number 15116, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kabinet Kaba & Mahamat Moustapha, 2021. "Remittances and firm performance in sub-Saharan Africa : evidence from firm-level data," Working Papers hal-03515100, HAL.
    2. Cynthia TABET & Michel ROCCA & Bachir EL MURR, 2022. "Transferts de fonds et effet boomerang : le cas du Liban (1990-2016)," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 55, pages 133-148.
    3. Mohammad Reza Farzanegan & Sherif Maher Hassan & Ribal Abi Raad, 2017. "Causes and Impacts of Remittances: Household Survey Evidence from Egypt," MAGKS Papers on Economics 201737, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    4. Sherif M. Hassan, 2020. "Revisiting the Development Impact of Sectorally Disaggregated Foreign Aid," Poverty & Public Policy, John Wiley & Sons, vol. 12(2), pages 123-149, June.
    5. Muzammil, Muhammad, 2020. "A Comparison of Agricultural, Industrial and Services Sector Impact on Trade Balance: A Case Study of Pakistan," MPRA Paper 95750, University Library of Munich, Germany.
    6. Kabinet Kaba & Mahamat Moustapha, 2021. "Remittances and firm performance in sub-Saharan Africa: evidence from firm-level data," Working Papers DT/2021/07, DIAL (Développement, Institutions et Mondialisation).
    7. Boburmirzo Ibrokhimov & Rashid Javed & Mazhar Mughal, 2023. "Migrants remittances and fertility in the Post-Soviet states," Post-Communist Economies, Taylor & Francis Journals, vol. 35(6), pages 574-596, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gloria Clarissa O. Dzeha, 2016. "The decipher, theory or empirics: a review of remittance studies," African Journal of Accounting, Auditing and Finance, Inderscience Enterprises Ltd, vol. 5(2), pages 113-134.
    2. Nahed Zghidi & Imen Mohamed Sghaier & Zouheir Abida, 2018. "Remittances, Institutions, and Economic Growth in North African Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 9(3), pages 804-821, September.
    3. Ziesemer, Thomas H.W., 2012. "Worker remittances, migration, accumulation and growth in poor developing countries: Survey and analysis of direct and indirect effects," Economic Modelling, Elsevier, vol. 29(2), pages 103-118.
    4. Ma, Yechi & Chen, Zhiguo & Shinwari, Riazullah & Khan, Zeeshan, 2021. "Financialization, globalization, and Dutch disease: Is Dutch disease exist for resources rich countries?," Resources Policy, Elsevier, vol. 72(C).
    5. James Dzansi, 2013. "Do remittance inflows promote manufacturing growth?," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 51(1), pages 89-111, August.
    6. Oluwasheyi S. Oladipo, 2020. "Migrant Workers' Remittances And Economic Growth: A Time Series Analysis," Journal of Developing Areas, Tennessee State University, College of Business, vol. 54(4), pages 75-88, October-D.
    7. Blaise Gnimassoun & John C. Anyanwu, 2019. "The Diaspora and economic development in Africa," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 155(4), pages 785-817, November.
    8. Imen Mohamed Sghaier, 2022. "Foreign Capital Inflows and Economic Growth in North African Countries: the Role of Human Capital," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(4), pages 2804-2821, December.
    9. repec:dgr:unumer:2008063 is not listed on IDEAS
    10. Blaise Gnimassoun & John Anyanwu, 2019. "Working Paper 308 - The Diaspora and Economic Development in Africa," Working Paper Series 2434, African Development Bank.
    11. Imen Mohamed Sghaier, 2021. "Foreign Financial Flows, Human Capital and Economic Growth in North African Countries," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 3, pages 355-371, September.
    12. Shreya Pal, 2023. "Does Remittance and Human Capital Formation Affect Financial Development? A Comparative Analysis Between India and China," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 30(2), pages 387-426, June.
    13. Thanh Dinh Su & Canh Phuc Nguyen, 2022. "Foreign financial flows, human capital and economic growth in African developing countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 3010-3031, July.
    14. Blaise Gnimassoun & C. John Anyanwu, 2018. "The Diaspora And Economic Development In Africa," Working Papers hal-04141793, HAL.
    15. Balli, Faruk & Rana, Faisal, 2015. "Determinants of risk sharing through remittances," Journal of Banking & Finance, Elsevier, vol. 55(C), pages 107-116.
    16. Hector Perez-Saiz & Mr. Jemma Dridi & Tunc Gursoy & Mounir Bari, 2019. "The Impact of Remittances on Economic Activity: The Importance of Sectoral Linkages," IMF Working Papers 2019/175, International Monetary Fund.
    17. Farzanegan, Mohammad Reza & Lessmann, Christian & Markwardt, Gunther, 2018. "Natural resource rents and internal conflicts: Can decentralization lift the curse?," Economic Systems, Elsevier, vol. 42(2), pages 186-205.
    18. Farzanegan, Mohammad Reza & Witthuhn, Stefan, 2017. "Corruption and political stability: Does the youth bulge matter?," European Journal of Political Economy, Elsevier, vol. 49(C), pages 47-70.
    19. Mohammad Reza Farzanegan & Stefan Witthuhn, 2014. "Demographic Transition and Political Stability: Does Corruption Matter?," CESifo Working Paper Series 5133, CESifo.
    20. Sobiech, Izabela, 2019. "Remittances, finance and growth: Does financial development foster the impact of remittances on economic growth?," World Development, Elsevier, vol. 113(C), pages 44-59.
    21. Peter Nderitu GITHAIGA, 2019. "Foreign Remittances, Private Sector Investment and Banking Sector Development," Journal of Economics and Financial Analysis, Tripal Publishing House, vol. 3(2), pages 85-112.

    More about this item

    Keywords

    remittances; Middle East and North Africa; trade balance; panel regression;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_6172. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.