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On interactions between remittance outflows and Saudi Arabian macroeconomy: New evidence from wavelets

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  • Hathroubi, Salem
  • Aloui, Chaker

Abstract

The effect of workers' remittance outflows on macroeconomic variables of host countries is a controversial issue. The purpose of this paper is to study lead/lag interactions between workers' remittance outflows and macroeconomic leading variables in Saudi Arabia for 1980–2013 within a time–frequency framework. To this end, we perform three wavelet variants, namely, the wavelet power spectrum, the cross-spectrum wavelet, and the coherence wavelet. We show that remittance outflows are strongly associated with the main Saudi aggregates and that their relationships change across time scale and frequency bands. In the short- and mid-term, real output growth and government expenditures guide remittance outflows. More specifically, government expenditures positively affect remittance shares to real outputs. In addition, the wavelet analysis reveals a positive causality link from the active population to remittances over low-frequency bands. These outcomes have several prominent implications and point to practical recommendations in terms of monetary policy coordination and financial stability.

Suggested Citation

  • Hathroubi, Salem & Aloui, Chaker, 2016. "On interactions between remittance outflows and Saudi Arabian macroeconomy: New evidence from wavelets," Economic Modelling, Elsevier, vol. 59(C), pages 32-45.
  • Handle: RePEc:eee:ecmode:v:59:y:2016:i:c:p:32-45
    DOI: 10.1016/j.econmod.2016.06.018
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    Cited by:

    1. Kakhkharov, Jakhongir & Akimov, Alexandr & Rohde, Nicholas, 2017. "Transaction costs and recorded remittances in the post-Soviet economies: Evidence from a new dataset on bilateral flows," Economic Modelling, Elsevier, vol. 60(C), pages 98-107.

    More about this item

    Keywords

    Workers' remittances; Economic growth; Government expenditures; Wavelets;

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances

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