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Do transfer costs matter for foreign remittances?

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  • Ahmed, Junaid
  • Martínez-Zarzoso, Inmaculada

Abstract

Using bilateral data on remittance flows to Pakistan for 23 major host countries, this is the first study that examines the effect of transaction costs on foreign remittances. The authors find that the effect of transaction costs on remittance flows is negative and significant; suggesting that a high cost will either refrain migrants from sending money back home or make them remit through informal channels. They also find that remittances are facilitated by the existence of migrant networks and improvements in home and host country financial services. Distance, which has been used in previous studies as an indicator of the cost of remitting, is found to be a poor proxy.

Suggested Citation

  • Ahmed, Junaid & Martínez-Zarzoso, Inmaculada, 2016. "Do transfer costs matter for foreign remittances?," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 10, pages 1-36.
    • Handle: RePEc:zbw:ifweej:20164
    DOI: 10.5018/economics-ejournal.ja.2016-4
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    References listed on IDEAS

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    Cited by:

    1. Kim, Kijin & Ardaniel, Zemma & Kikkawa, Aiko & Endriga, Benjamin, 2022. "Bilateral Remittance Inflows to Asia and the Pacific: Countercyclicality and Motivations to Remit," ADBI Working Papers 1315, Asian Development Bank Institute.
    2. Hafiz M. Sohail & Mir Zatullah & Zengfu Li, 2021. "Effect of Foreign Direct Investment on Bilateral Trade: Experience From Asian Emerging Economies," SAGE Open, , vol. 11(4), pages 21582440211, October.
    3. Junaid Ahmed & Mazhar Mughal & Inmaculada Martínez‐Zarzoso, 2021. "Sending money home: Transaction cost and remittances to developing countries," The World Economy, Wiley Blackwell, vol. 44(8), pages 2433-2459, August.
    4. Junaid Ahmed & Mazhar Mughal, 2019. "Cost Of Remitting To Pakistan Across Major Corridors," PIDE Research Briefs 2019:04, Pakistan Institute of Development Economics.
    5. Gnangnon, Sèna Kimm, 2023. "Duration of membership in the world trade organization and investment-oriented remittances inflows," The Quarterly Review of Economics and Finance, Elsevier, vol. 88(C), pages 258-277.
    6. Kpodar, Kangni & Amir Imam, Patrick, 2024. "How do transaction costs influence remittances?," World Development, Elsevier, vol. 177(C).
    7. Emara, Noha & Zhang, Yuanhao, 2021. "The non-linear impact of digitization on remittances inflow: Evidence from the BRICS," Telecommunications Policy, Elsevier, vol. 45(4).
    8. Ziauddin Ahmed & Anchana NaRanong, 2023. "The Effects of ICT/e-Government on Migrant Workers' Remittance Inflows in Bangladesh: An Empirical Study," Journal of Sustainable Development, Canadian Center of Science and Education, vol. 16(1), pages 1-53, May.
    9. Gascón, Patricia & Larramona, Gemma & Salvador, Manuel, 2023. "The impact of digitalisation on remittances. Evidence from El Salvador," Telecommunications Policy, Elsevier, vol. 47(4).

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    More about this item

    Keywords

    remittances; geographical distance; transaction cost; financial services; Pakistan;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F30 - International Economics - - International Finance - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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