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Rainfall, Financial Development, and Remittances: Evidence from Sub-Saharan Africa

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  • Rabah Arezki

    () (International Monetary Fund (IMF))

  • Markus Bruckner

    () (School of Economics, University of Adelaide)

Abstract

We use annual variations in rainfall to examine the effects that exogenous, transitory income shocks have on remittances in a panel of 41 Sub-Saharan African countries during the period 1970-2007. Our main finding is that on average rainfall shocks have an insignificant contemporaneous effect on remittances. However, the marginal effect is significantly decreasing in the share of domestic credit to GDP. So much so, that at high levels of credit to GDP rainfall shocks have a significant negative effect on remittances, while at low levels of credit to GDP the effect of rainfall on remittances is significantly positive.

Suggested Citation

  • Rabah Arezki & Markus Bruckner, 2011. "Rainfall, Financial Development, and Remittances: Evidence from Sub-Saharan Africa," School of Economics Working Papers 2011-30, University of Adelaide, School of Economics.
  • Handle: RePEc:adl:wpaper:2011-30
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    File URL: http://www.economics.adelaide.edu.au/research/papers/doc/wp2011-30.pdf
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    References listed on IDEAS

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    7. Giulia Bettin & Alberto Zazzaro, 2016. "The Impact of Natural Disasters on Remittances to Low- and Middle-income Countries," CSEF Working Papers 431, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    8. Unbreen Qayyum & Muhammad Nawaz, 2014. "Remittances and Economic Growth: The Role of Financial Development," PIDE-Working Papers 2014:100, Pakistan Institute of Development Economics.
    9. Coulibaly, Dramane, 2015. "Remittances and financial development in Sub-Saharan African countries: A system approach," Economic Modelling, Elsevier, vol. 45(C), pages 249-258.
    10. Mardan, Mohammed, 2017. "Why countries differ in thin capitalization rules: The role of financial development," European Economic Review, Elsevier, vol. 91(C), pages 1-14.
    11. Brückner, Markus & Gradstein, Mark, 2013. "Effects of transitory shocks to aggregate output on consumption in poor countries," Journal of International Economics, Elsevier, vol. 91(2), pages 343-357.
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    16. Giulia Bettin & Andrea F. Presbitero & Nikola L. Spatafora, 2017. "Remittances and Vulnerability in Developing Countries," World Bank Economic Review, World Bank Group, vol. 31(1), pages 1-23.
    17. Mitrut, Andreea & Wolff, François-Charles, 2014. "Remittances after natural disasters: Evidence from the 2004 Indian tsunami," Working Papers in Economics 604, University of Gothenburg, Department of Economics.
    18. Izabela Sobiech, 2015. "Remittances, finance and growth: does financial development foster remittances and their impact on economic growth," FIW Working Paper series 158, FIW.
    19. Lim, Sokchea & Morshed, A.K.M. Mahbub, 2015. "International migration, migrant stock, and remittances: Reexamining the motivations to remit," The Quarterly Review of Economics and Finance, Elsevier, vol. 57(C), pages 101-115.
    20. Lin, Faqin & Sim, Nicholas C.S., 2014. "Baltic Dry Index and the democratic window of opportunity," Journal of Comparative Economics, Elsevier, vol. 42(1), pages 143-159.
    21. Arezki, Rabah & Brückner, Markus, 2012. "Rainfall, financial development, and remittances: Evidence from Sub-Saharan Africa," Journal of International Economics, Elsevier, vol. 87(2), pages 377-385.
    22. Baas, Timo & Melzer, Silvia, 2016. "The Macroeconomic Impact of Remittances: A Sending Country Perspective," Annual Conference 2016 (Augsburg): Demographic Change 145631, Verein für Socialpolitik / German Economic Association.
    23. von Hagen, Jürgen & Zhang, Haiping, 2014. "Financial development, international capital flows, and aggregate output," Journal of Development Economics, Elsevier, vol. 106(C), pages 66-77.

    More about this item

    Keywords

    Transitory Income Shocks; Remittances; Financial Development;

    JEL classification:

    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • F30 - International Economics - - International Finance - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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