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Remittances and Household Consumption Instability in Developing Countries

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  • Combes, Jean-Louis
  • Ebeke, Christian

Abstract

Summary This paper analyzes the impact of remittances on household consumption instability in a large panel of developing countries. There are four main results. First, remittances significantly reduce household consumption instability. Second, remittances play an insurance role by dampening the effects of various sources of consumption instability in developing countries (natural disasters, agricultural shocks, discretionary fiscal policy, systemic financial and banking crises and exchange rate instability). Third, the stabilizing role played by remittances is stronger in less financially developed countries. Fourth, the overall stabilizing effect of remittances is mitigated when remittances exceed 6% of GDP.

Suggested Citation

  • Combes, Jean-Louis & Ebeke, Christian, 2011. "Remittances and Household Consumption Instability in Developing Countries," World Development, Elsevier, vol. 39(7), pages 1076-1089, July.
  • Handle: RePEc:eee:wdevel:v:39:y:2011:i:7:p:1076-1089
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    More about this item

    Keywords

    remittances consumption instability financial development shocks threshold effects developing countries;

    JEL classification:

    • F29 - International Economics - - International Factor Movements and International Business - - - Other
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact

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