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The Macroeconomics of Remittances In the Philippines

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  • Bayangos, V.B.
  • Jansen, K.

Abstract

The literature on remittances has in the past concentrated on the microeconomic aspects of the remittance process: the determinants of remittances, impact of remittances on household allocation decisions, and their impact on poverty. Only recently has there been more attention on the macroeconomic impact of remittances. It is to be expected that, when remittance inflows are as large as they are in the Philippines, they are likely to have significant macroeconomic effects. Our paper first explores the cyclical dynamics of remittances to the Philippines and secondly, analyses the macroeconomic impact of remittances and the monetary policy implications. In this second endeavour, our paper uses a dynamic structural quarterly macroeconometric model of the Philippines to trace the various channels along which remittances affect the main macroeconomic variables. In the assessment of the impact of the recent global recession we should also consider the remittances as a transmission channel. We have established that remittances are driven by the economic cycle of the main host countries and that the ongoing recession will thus lead to a decline in transfers. Through our model we have been able to trace the impact of changes in remittances on important economic variables, like aggregate demand, money supply and interest rates, exchange rate and labour supply and wages. We have also established that the fluctuations in remittances flows over the years are of a magnitude that is significant enough for policy makers to take notice. The model simulations have shown that the impact of the US recession on the Philippine economy is more severe once we take account of the endogeneity and pro-cyclicality of remittances.

Suggested Citation

  • Bayangos, V.B. & Jansen, K., 2009. "The Macroeconomics of Remittances In the Philippines," ISS Working Papers - General Series 19676, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    • Handle: RePEc:ems:euriss:19676
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    1. Bayangos, V.B. & Jansen, K., 2010. "Remittances and competitiveness," ISS Working Papers - General Series 18701, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    2. Tchantchane, A. & Rodrigues, G. & Fortes, P.C., 2013. "An Empirical Study on the importance of Remittance and Educational Expenditure on Growth: Case of the Philippines," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 13(1), pages 173-186.
    3. Khodeir, Aliaa, 2015. "Migration Remittances Inflows and Macroeconomic Shocks: The Case of Egypt," MPRA Paper 103506, University Library of Munich, Germany, revised 2015.
    4. Veronica Bayangos & Karel Jansen, 2010. "The Macroeconomics of Remittances in The Philippines," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 28(61), pages 18-58, August.
    5. Aliaa Nabil Khodeir, 2015. "Migration Remittances Inflows and Macroeconomic Shocks: The Case of Egypt," International Journal of Economics and Financial Issues, Econjournals, vol. 5(4), pages 1001-1010.
    6. Alper Karasoy, 2021. "How do remittances to the Philippines affect its environmental sustainability? Evidence based on the augmented ARDL approach," Natural Resources Forum, Blackwell Publishing, vol. 45(2), pages 120-137, May.
    7. Haryo Kuncoro, 2020. "The role of exchange rate in remittance inflows: Evidence from Indonesia," Economics Bulletin, AccessEcon, vol. 40(2), pages 1508-1521.
    8. Bayangos, Veronica & Jansen, Karel, 2011. "Remittances and Competitiveness: The Case of the Philippines," World Development, Elsevier, vol. 39(10), pages 1834-1846.
    9. Sarah Lynne Salvador Daway‐Ducanes, 2019. "Remittances, Dutch Disease, and Manufacturing Growth in Developing Economies," Scottish Journal of Political Economy, Scottish Economic Society, vol. 66(3), pages 360-383, July.

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    More about this item

    Keywords

    Exchange rate; Monetary policy; Remittances;
    All these keywords.

    JEL classification:

    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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