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Output growth volatility and remittances


  • Matteo Bugamelli

    () (Bank of Italy, Economic Research Department)

  • Francesco Patern�

    () (Bank of Italy, Economic Research Department)


Since output growth volatility has negative effects on growth, poverty and welfare, especially in poorer countries, it is crucial to identify the country-specific factors that affect it. The empirical literature has focused mostly on financial development, policy distortions and globalization variables. Among the latter, attention has been directed in particular to trade and financial openness. We contribute to this literature by adding what we see as the missing globalization variable, the one related to the increasingly important phenomenon of international migrations, namely emigrants' remittances. Remittances can help reduce output growth volatility thanks to their considerable magnitude, stability and low pro-cyclicality. Applying an empirical framework taken from the existing literature to a sample of about 60 emerging and developing economies over the period 1980-2003, we provide robust evidence that remittances are negatively correlated to output growth volatility. Instrumental variable estimation supports our intuition about the direction of causality.

Suggested Citation

  • Matteo Bugamelli & Francesco Patern�, 2008. "Output growth volatility and remittances," Temi di discussione (Economic working papers) 673, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:wptemi:td_673_08

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    References listed on IDEAS

    1. Adams Jr., Richard H. & Cuecuecha, Alfredo, 2010. "Remittances, Household Expenditure and Investment in Guatemala," World Development, Elsevier, vol. 38(11), pages 1626-1641, November.
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    5. Dean Yang, 2008. "International Migration, Remittances and Household Investment: Evidence from Philippine Migrants' Exchange Rate Shocks," Economic Journal, Royal Economic Society, vol. 118(528), pages 591-630, April.
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    Cited by:

    1. Sarah Jacobson & Ragan Petrie, 2014. "Favor trading in public good provision," Experimental Economics, Springer;Economic Science Association, vol. 17(3), pages 439-460, September.
    2. Irena Mikolajun & Jean-Marie Viaene, 2015. "Trade, Factor Mobility and the Extent of Economic Integration: Theory and Evidence," Tinbergen Institute Discussion Papers 15-096/VI, Tinbergen Institute.
    3. Faruk Balli & Faisal Rana, 2014. "Determinants of risk sharing through remittances: cross-country evidence," CAMA Working Papers 2014-12, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    4. Christian EBEKE, 2010. "Transferts des migrants, ouverture sur l'extérieur et dépenses publiques dans les pays en développement," Working Papers 201011, CERDI.
    5. Bugamelli, Matteo & Paternò, Francesco, 2009. "Do Workers' Remittances Reduce the Probability of Current Account Reversals?," World Development, Elsevier, vol. 37(12), pages 1821-1838, December.
    6. Chami Ralph & Hakura Dalia S. & Montiel Peter J., 2012. "Do Worker Remittances Reduce Output Volatility in Developing Countries?," Journal of Globalization and Development, De Gruyter, vol. 3(1), pages 1-25, June.
    7. Rémi Generoso, 2012. "Transferts de fonds et résilience des pays d'Afrique de l'Ouest face à la variabilité des précipitations : une perspective macroéconomique," Working Papers hal-00830021, HAL.
    8. Bentour, El Mostafa, 2013. "Should Moroccan Officials Depend on the Workers’ Remittances to Finance the Current Account Deficit?," MPRA Paper 52290, University Library of Munich, Germany, revised 01 May 2013.
    9. World Bank Group, 2015. "Global Economic Prospects, January 2015 : Having Fiscal Space and Using It," World Bank Publications, The World Bank, number 20758.
    10. Balli, Faruk & Rana, Faisal, 2015. "Determinants of risk sharing through remittances," Journal of Banking & Finance, Elsevier, vol. 55(C), pages 107-116.
    11. Combes, Jean-Louis & Ebeke, Christian, 2011. "Remittances and Household Consumption Instability in Developing Countries," World Development, Elsevier, vol. 39(7), pages 1076-1089, July.
    12. 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.
    13. Irena Mikolajun & Jean-Marie Viaene, 2015. "Trade, Factor Mobility and the Extent of Economic Integration: Theory and Evidence," CESifo Working Paper Series 5481, CESifo Group Munich.
    14. Magnusson, Kristin, 2009. "The Impact of U.S. Regional Business Cycles on Remittances to Latin America," SSE/EFI Working Paper Series in Economics and Finance 710, Stockholm School of Economics.
    15. James Dzansi, 2013. "Do remittance inflows promote manufacturing growth?," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 51(1), pages 89-111, August.
    16. Klomp, Jeroen & de Haan, Jakob, 2009. "Political institutions and economic volatility," European Journal of Political Economy, Elsevier, vol. 25(3), pages 311-326, September.
    17. Hrushikesh Mallick & Mantu Kumar Mahalik, 2016. "Motivating Factors Of Remittances Inflows Into Developing Asian Economies," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 61(04), pages 1-26, September.
    18. Katsushi S. Imai & Bilal Malaeb & Fabrizio Bresciani, 2016. "Remittances, Growth and Poverty Reduction in Asia - A Critical Review of the Literature and the New Evidence from Cross-country Panel Data," Discussion Paper Series DP2016-28, Research Institute for Economics & Business Administration, Kobe University.
    19. Immaculate Machasio, 2016. "Do Remittance Flows Stabilize Developing Countries in the aftermath of Sovereign Defaults?," MAGKS Papers on Economics 201639, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    20. TCHAMANBÉ DJINÉ Louise, TDL & MIAMO WENDJI Clovis, MWC, 2012. "Transferts Financiers des Migrants et développement en Afrique subsaharienne," MPRA Paper 38139, University Library of Munich, Germany.

    More about this item


    output growth volatility; workers’ remittances; compensation of employees; financial development; trade and financial openness;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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