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Has the sovereign debt crisis changed the cyclicality of Portuguese remittances?

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  • Leonida Correia
  • Patrícia Martins

Abstract

This paper explores the cyclicality of remittances into Portugal from 1996 to 2015. Using bilateral correlations and econometric model regression approaches, we investigate if remittances are countercyclical or procyclical with Portuguese, French and Swiss outputs (France and Switzerland being the two main remitting countries). We also examine the ability of remittances to smooth macroeconomic shocks, and compare their role with other external financial sources. The empirical results suggest that the sovereign debt crisis has changed the cyclicality of remittances from procyclical in relation to Portuguese GDP in the years before the crisis to countercyclical during the crisis period. This conclusion is valid regardless of the economic situation of home and host countries and is robust to the use of different statistical information to measure the business cycle of Portugal (GDP, private consumption, or unemployment rate). Thus, we conclude that remittances received by Portuguese households played an economic stabilization role in the crisis years.

Suggested Citation

  • Leonida Correia & Patrícia Martins, 2019. "Has the sovereign debt crisis changed the cyclicality of Portuguese remittances?," International Review of Applied Economics, Taylor & Francis Journals, vol. 33(3), pages 453-472, May.
    • Handle: RePEc:taf:irapec:v:33:y:2019:i:3:p:453-472
    DOI: 10.1080/02692171.2018.1511692
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