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A Theory of Workers' Remittances with An Application to Morocco

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  • Jacques Bouhga-Hagbe
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    Abstract

    This paper provides a model on how altruism, "attachment" to the home country, and portfolio diversification may act as potential motives behind workers'' remittances. It shows that the level of workers'' remittances depends on how great are their degrees of altruism and "attachment" to their home country, and should also depend on interest rate differentials between the home country and the country of residence if portfolio diversification motives are significant in the decision to remit. The model is applied to Morocco using co-integration techniques. The paper then discusses the stability of remittances in Morocco and the policy implications in light of the empirical findings.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/194.

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    Length: 35
    Date of creation: 01 Oct 2004
    Date of revision:
    Handle: RePEc:imf:imfwpa:04/194

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    Related research

    Keywords: Salary remittances; Economic models; remittances; equation; workers ? remittances; migration; statistics; equations; correlation; econometrics; logarithm; estimation period; predictions; remittance; impact of remittances; time series; statistic; hypothesis testing; sample size; cointegration; migrant; significance levels; determinants of remittances; probability; remittance flows; optimization; international remittances; constant term; migrant remittances; prediction; effect of remittances; capital flows; goodness of fit; migrants ? remittances; financial statistics; use of remittances; effects of remittances; uses of remittances; effect of remittances on growth; remitters; impact of remittances on labor force participation; autocorrelation; random error; regular remittances; remittances flow; sampling; immigrant remittance; estimation procedure; skewness; kurtosis; correlations; regression equation; vector autoregression; recipients of remittances; role of remittances;

    This paper has been announced in the following NEP Reports:

    References

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    1. Russell, Sharon Stanton, 1986. "Remittances from international migration: A review in perspective," World Development, Elsevier, vol. 14(6), pages 677-696, June.
    2. Flore Gubert, 2002. "Do Migrants Insure Those who Stay Behind? Evidence from the Kayes Area (Western Mali)," Oxford Development Studies, Taylor & Francis Journals, vol. 30(3), pages 267-287.
    3. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
    4. 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.
    5. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-91, May.
    6. Jean-Claude Nachega, 2001. "A Cointegration Analysis of Broad Money Demand in Cameroon," IMF Working Papers 01/26, International Monetary Fund.
    7. Poonam Gupta & James P. F. Gordon, 2004. "Nonresident Deposits in India," IMF Working Papers 04/48, International Monetary Fund.
    8. Poirine, Bernard, 1997. "A theory of remittances as an implicit family loan arrangement," World Development, Elsevier, vol. 25(4), pages 589-611, January.
    9. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
    10. Johnson, George E & Whitelaw, W E, 1974. " Urban-Rural Income Transfers in Kenya: An Estimated-Remittances Function," Economic Development and Cultural Change, University of Chicago Press, vol. 22(3), pages 473-79, April.
    11. Peter C.B. Phillips, 1985. "Understanding Spurious Regressions in Econometrics," Cowles Foundation Discussion Papers 757, Cowles Foundation for Research in Economics, Yale University.
    12. Joseph G. Altonji & Fumio Hayashi & Laurence J. Kotlikoff, 1993. "Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data," NBER Working Papers 3046, National Bureau of Economic Research, Inc.
    13. Brown, Richard P. C., 1997. "Estimating remittance functions for Pacific Island Migrants," World Development, Elsevier, vol. 25(4), pages 613-626, January.
    14. Elbadawi, Ibrahim & de Rezende Rocha, Robert, 1992. "Determinants of expatriate workers'remittances in North Africa and Europe," Policy Research Working Paper Series 1038, The World Bank.
    15. Banerjee, Anindya, et al, 1986. "Exploring Equilibrium Relationships in Econometrics through Static Models: Some Monte Carlo Evidence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 253-77, August.
    16. 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 131-68, October.
    17. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244.
    18. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
    19. Lucas, Robert E B & Stark, Oded, 1985. "Motivations to Remit: Evidence from Botswana," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 901-18, October.
    20. Dickey, David A & Rossana, Robert J, 1994. "Cointegrated Time Series: A Guide to Estimation and Hypothesis Testing," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 56(3), pages 325-53, August.
    21. Alderman, Harold, 1996. "Saving and economic shocks in rural Pakistan," Journal of Development Economics, Elsevier, vol. 51(2), pages 343-365, December.
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    Citations

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    Cited by:
    1. Carlos Vargas-Silva & Peng Huang, 2006. "Macroeconomic determinantsof workers' remittances: Hostversus home country's economic conditions," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(1), pages 81-99.
    2. Jacques Bouhga-Hagbe, 2006. "Altruism and Workers' Remittances: Evidence from Selected Countries in the Middle East and Central Asia," IMF Working Papers 06/130, International Monetary Fund.
    3. Barua, Shubhasish & Majumder, Md. Alauddin & Akhtaruzzaman, Dr. Md., 2007. "Determinants of Workers’ Remittances in Bangladesh: An Empirical Study," MPRA Paper 15080, University Library of Munich, Germany.
    4. Michael T. Gapen & Thomas F. Cosimano & Ralph Chami, 2006. "Beware of Emigrants Bearing Gifts: Optimal Fiscal and Monetary Policy in the Presence of Remittances," IMF Working Papers 06/61, International Monetary Fund.
    5. Alexei Kireyev, 2006. "The Macroeconomics of Remittances: the Case of Tajikistan," IMF Working Papers 06/2, International Monetary Fund.
    6. Marta Ruiz-Arranz & Erik Lueth, 2007. "Are Workers' Remittances a Hedge Against Macroeconomic Shocks? The Case of Sri Lanka," IMF Working Papers 07/22, International Monetary Fund.
    7. International Monetary Fund, 2006. "Determinants of Emigrant Deposits in Cape Verde," IMF Working Papers 06/132, International Monetary Fund.
    8. Jonathan Yoder & Adam McCoy & Mudziviri Nziramasanga, 2008. "The check is in the mail: Household characteristics and migrant remittance from the U.S. to Mexico," Working Papers 2008-1, School of Economic Sciences, Washington State University.
    9. Neagu , Ileana C. & Schiff, Maurice, 2009. "Remittance stability, cyclicality and stabilizing impact in developing countries," Policy Research Working Paper Series 5077, The World Bank.
    10. Erik Lueth & Marta Ruiz-Arranz, 2006. "A Gravity Model of Workers' Remittances," IMF Working Papers 06/290, International Monetary Fund.

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