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Remittances and Macroeconomic Volatility in African Countries

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  • Ahmat Jidoud

Abstract

This paper investigates the channels through which remittances affect macroeconomic volatility in African countries using a dynamic stochastic general equilibrium (DSGE) model augmented with financial frictions. Empirical results indicate that remittances—as a share of GDP—have a significant smoothing impact on output volatility but their impact on consumption volatility is somewhat small. Furthermore, remittances are found to absorb a substantial amount of GDP shocks in these countries. An investigation of the theoretical channels shows that the stabilization impact of remittances essentially hinges on two channels: (i) the size of the negative wealth effect on labor supply induced by remittances and, (ii) the strength of financial frictions and the ability of remittances to alleviate these frictions.

Suggested Citation

  • Ahmat Jidoud, 2015. "Remittances and Macroeconomic Volatility in African Countries," IMF Working Papers 15/49, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:15/49
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Remittances and Macroeconomic Volatility in African Countries
      by Christian Zimmermann in NEP-DGE blog on 2015-05-01 22:56:09

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    Cited by:

    1. Bresciani, F. & Imai, K.S. & Malaeb, B., 2017. "IFAD RESEARCH SERIES 15 - Remittances, growth and poverty reduction in Asia," IFAD Research Series 280053, International Fund for Agricultural Development (IFAD).
    2. Supriyo De & Ergys Islamaj & Ayhan Kose & S. Reza Yousefi, 2016. "Remittances over the Business Cycle: Theory and Evidence," Koç University-TUSIAD Economic Research Forum Working Papers 1601, Koc University-TUSIAD Economic Research Forum.
    3. repec:eee:ecanpo:v:59:y:2018:i:c:p:171-187 is not listed on IDEAS

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