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Remittances Channel and Fiscal Impact in the Middle East, North Africa, and Central Asia

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Author Info

  • Yasser Abdih
  • Ralph Chami
  • Christian Ebeke
  • Adolfo Barajas

Abstract

This paper identifies a remittances channel that transmits exogenous shocks, such as business cycles in remittance-sending countries, to the public finances of remittance-receiving countries. Using panel data for remittance-receiving countries in the Middle East, North Africa, and Central Asia, three types of results emerge. First, remittances appear to be strongly procyclical vis-Ã -vis sending country income. Second, remittances tend to be spent on consumption of both imported and domestically produced goods, rather than on investment. Third, shocks in the sending countries are transmitted via remittances to the public finances - specifically, tax revenues - of receiving countries. In the case of the 2009 global downturn, this impact was particularly strong for several countries in the Caucasus and Central Asia, whereas in the subsequent recovery in 2010 virtually all receiving countries benefitted from an upturn in remittance-driven tax revenues.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/104.

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Length: 40
Date of creation: 01 Apr 2012
Date of revision:
Handle: RePEc:imf:imfwpa:12/104

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Keywords: Tax revenues; Capital inflows; External shocks; Middle East and Central Asia; Private consumption; Workers remittances; remittances; remittance; tax revenue; fiscal impact; impact of remittances; remittance inflows; migration; workers ? remittances; bilateral remittances; value of remittances; tax bases; remittance flows; effect of remittances; determinants of remittances; remittance channel; public finances; fiscal balance; primary fiscal balance; bilateral remittance; amount of remittances; fiscal space; capita remittances; remittances inflows; fiscal balances; per capita remittances; tax base; remitter; utilization of remittances; capital flows; taxation; effects of remittances; net remittance; migrant; fiscal sustainability; net remittances; workers ? remittance; remittance corridors; public debt; effect of remittances on poverty; international remittances; macroeconomic effects of remittances; tax collection; fiscal implications; remittance data; tax ratio; data on remittances; government revenue; immigrant remittance; fiscal position; demand for remittances; remitters;

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References

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  1. Sanket Mohapatra & George Joseph & Dilip Ratha, 2012. "Remittances and natural disasters: ex-post response and contribution to ex-ante preparedness," Environment, Development and Sustainability, Springer, vol. 14(3), pages 365-387, June.
  2. Freund, Caroline & Spatafora, Nikola, 2008. "Remittances, transaction costs, and informality," Journal of Development Economics, Elsevier, vol. 86(2), pages 356-366, June.
  3. Ralph Chami & Yasser Abdih & Amine Mati & Michael T. Gapen, 2009. "Fiscal Sustainability in Remittance-Dependent Economies," IMF Working Papers 09/190, International Monetary Fund.
  4. Serdar Sayan, 2006. "Business Cycles and Workers' Remittances," IMF Working Papers 06/52, International Monetary Fund.
  5. Jeffrey Frankel, 2011. "Are Bilateral Remittances Countercyclical?," Open Economies Review, Springer, vol. 22(1), pages 1-16, February.
  6. David Antonio C., 2011. "How do International Financial Flows to Developing Countries Respond to Natural Disasters?," Global Economy Journal, De Gruyter, vol. 11(4), pages 1-38, December.
  7. Dalia Hakura & Ralph Chami & Peter Montiel, 2009. "Remittances," IMF Working Papers 09/91, International Monetary Fund.
  8. Keen, Michael & Lockwood, Ben, 2010. "The value added tax: Its causes and consequences," Journal of Development Economics, Elsevier, vol. 92(2), pages 138-151, July.
  9. Parsons, Christopher R. & Skeldon, Ronald & Walmsley, Terrie L. & Winters, L. Alan, 2007. "Quantifying international migration : a database of bilateral migrant stocks," Policy Research Working Paper Series 4165, The World Bank.
  10. Eaton Jonathan & Tamura Akiko, 1994. "Bilateralism and Regionalism in Japanese and U.S. Trade and Direct Foreign Investment Patterns," Journal of the Japanese and International Economies, Elsevier, vol. 8(4), pages 478-510, December.
  11. Ilene Grabel, 2009. "Remittances: Political Economy and Developmental Implications," International Journal of Political Economy, M.E. Sharpe, Inc., vol. 38(4), pages 86-106, December.
  12. Aggarwal, Reena & Demirgüç-Kunt, Asli & Pería, Maria Soledad Martínez, 2011. "Do remittances promote financial development?," Journal of Development Economics, Elsevier, vol. 96(2), pages 255-264, November.
  13. Michael T. Gapen & Ralph Chami & Peter Montiel & Adolfo Barajas & Connel Fullenkamp, 2009. "Do Workers' Remittances Promote Economic Growth?," IMF Working Papers 09/153, International Monetary Fund.
  14. Samir Jahjah & Ralph Chami & Connel Fullenkamp, 2003. "Are Immigrant Remittance Flows a Source of Capital for Development," IMF Working Papers 03/189, International Monetary Fund.
  15. 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.
  16. B. Gabriela Mundaca, 2009. "Remittances, Financial Market Development, and Economic Growth: The Case of Latin America and the Caribbean," Review of Development Economics, Wiley Blackwell, vol. 13(2), pages 288-303, 05.
  17. Jihad Dagher & Ralph Chami & Peter Montiel & Yasser Abdih, 2008. "Remittances and Institutions," IMF Working Papers 08/29, International Monetary Fund.
  18. Raju Jan Singh & Kyung-woo Lee & Markus Haacker, 2009. "Determinants and Macroeconomic Impact of Remittances in Sub-Saharan Africa," IMF Working Papers 09/216, International Monetary Fund.
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Citations

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Cited by:
  1. Mthuli Ncube & Zuzana Brixiova, 2013. "Working Paper 188 - Remittances and their Macroeconomic Impact: Evidence from Africa," Working Paper Series 996, African Development Bank.
  2. Thomas H.W. ZIESEMER, 2012. "Worker remittances and government behaviour in the receiving countries," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 3, pages 37-59, December.
  3. Faruk Balli & Faisal Rana, 2014. "Determinants of risk sharing through remittances: cross-country evidence," CAMA Working Papers 2014-12, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  4. Adolfo Barajas & Ralph Chami & Christian Ebeke & Sampawende J.-A. Tapsoba, 2012. "Workers’ Remittances," IMF Working Papers 12/251, International Monetary Fund.
  5. Alberto Behar & Jaime Espinosa-Bowen, 2014. "Export Spillovers from Global Shocks for the Middle East and Central Asia," IMF Working Papers 14/80, International Monetary Fund.
  6. Abida Zouheir & Imen Mohamed Sghaier, 2014. "Remittances, Financial Development and Economic Growth: The Case of North African Countries," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 17(51), pages 137-170, March.

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