Remittances, transaction costs, and informality
Recorded workers' remittances to developing countries reached $167Â billion in 2005, bringing increasing attention to these flows as a potential tool for development. In this paper, we explore the determinants of remittances and their associated transaction costs. We find that recorded remittances depend positively on the stock of migrants and negatively on transfer costs and exchange rate restrictions. In turn, transfer costs are lower when financial systems are more developed and exchange rates less volatile. The negative impact of transactions costs on remittances suggests that migrants either refrain from sending money home or else remit through informal channels when costs are high. We provide evidence from household surveys supportive of a sizeable informal sector.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Freund, Caroline & Spatafora, Nikola, 2005. "Remittances : transaction costs, determinants, and informal flows," Policy Research Working Paper Series 3704, The World Bank.
- Dean Yang, 2008.
"International Migration, Remittances and Household Investment: Evidence from Philippine Migrants' Exchange Rate Shocks,"
Royal Economic Society, vol. 118(528), pages 591-630, 04.
- Dean Yang, 2006. "International Migration, Remittances, and Household Investment: Evidence from Philippine Migrants' Exchange Rate Shocks," NBER Working Papers 12325, National Bureau of Economic Research, Inc.
- Serdar Sayan, 2006. "Business Cycles and Workers' Remittances; How Do Migrant Workers Respond to Cyclical Movements of GDP At Home?," IMF Working Papers 06/52, International Monetary Fund. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:deveco:v:86:y:2008:i:2:p:356-366. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If references are entirely missing, you can add them using this form.