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Economic volatility and remittances

  • Roland Craigwell
  • Mahalia Jackman
  • Winston Moore

Purpose – Remittances are the fastest growing source of foreign exchange earnings for developing countries. The purpose of this paper is to assess the impact of remittances on economic volatility of the receiving country. Design/methodology/approach – A panel of 95 countries over the period 1970-2005 is employed in the analysis. To assess the impact of remittances on volatility a multivariate model is estimated using a panel fixed effects approach with cross-section weights. Findings – The study reports that remittances can play a key role in mitigating the effect of adverse output shocks but exert no significant influence on consumption and investment volatility. Moreover, important differential impacts exist across the various country groupings. Practical implications – Countries that are dependent on remittances may have to monitor and forecast future remittance flows and take these projections into account when making changes to either their monetary or fiscal policy stance. Originality/value – The findings provided in this paper should be of use to policymakers in developing countries.

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Article provided by Emerald Group Publishing in its journal International Journal of Development Issues.

Volume (Year): 9 (2010)
Issue (Month): 1 (April)
Pages: 25-42

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Handle: RePEc:eme:ijdipp:v:9:y:2010:i:1:p:25-42
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  1. Olivier Blanchard & John Simon, 2001. "The Long and Large Decline in U.S. Output Volatility," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(1), pages 135-174.
  2. Amuedo-Dorantes, Catalina & Pozo, Susan, 2004. "Workers' Remittances and the Real Exchange Rate: A Paradox of Gifts," World Development, Elsevier, vol. 32(8), pages 1407-1417, August.
  3. Rapoport, Hillel & Docquier, Frederic, 2006. "The Economics of Migrants' Remittances," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
  4. Acosta, Pablo & Calderon, Cesar & Fajnzylber, Pablo & Lopez, Humberto, 2008. "What is the Impact of International Remittances on Poverty and Inequality in Latin America?," World Development, Elsevier, vol. 36(1), pages 89-114, January.
  5. Mahalia Jackman & Roland Craigwell & Winston Moore, 2009. "Economic volatility and remittances: evidence from SIDS," Journal of Economic Studies, Emerald Group Publishing, vol. 36(2), pages 135-146, May.
  6. Adams, Richard Jr. & Page, John, 2005. "Do international migration and remittances reduce poverty in developing countries?," World Development, Elsevier, vol. 33(10), pages 1645-1669, October.
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