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Do Workers' Remittances Reduce the Probability of Current Account Reversals?

  • Bugamelli, Matteo
  • Paternò, Francesco

Summary This paper tests whether the large, cheap, stable, and low-cyclical flows of workers' remittances reduce the probability of current account reversals in recipient countries. Using a large panel of emerging and developing economies, we find that this is indeed the case: when remittances get above 3% of GDP, the relationship between a decreasing stock of international reserves and a higher probability of current account reversals becomes less stringent. IV estimation proves that the effect of remittances on current account reversals is of a causal nature.

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Article provided by Elsevier in its journal World Development.

Volume (Year): 37 (2009)
Issue (Month): 12 (December)
Pages: 1821-1838

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Handle: RePEc:eee:wdevel:v:37:y:2009:i:12:p:1821-1838
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