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What Explains Remittance Fees? Panel Evidence

Author

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  • Thorsten Beck
  • Mathilde Janfils
  • Mr. Kangni R Kpodar

Abstract

This paper uses data across 365 corridors to document time and country variation in remittance fees and explore factors predicting variation in remittance fees. We document a general reduction in such fees over the past decade although the goal of fees below 3 percent has not been met yet in many corridors. We identify both cost- and risk-based constraints and market structure as barriers to lower remittance fees. Higher transaction costs as result of a more rural population in the sending country and lower scale are associated with higher remittance fees. However, lower risks due to the stability of fixed exchange rates and Internet rather than cash payment are associated with lower remittance fees. Finally, remittance corridors dominated by banks and few players are characterized by higher fees.

Suggested Citation

  • Thorsten Beck & Mathilde Janfils & Mr. Kangni R Kpodar, 2022. "What Explains Remittance Fees? Panel Evidence," IMF Working Papers 2022/063, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2022/063
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    Cited by:

    1. Katherine Baer & Ruud De Mooij & Shafik Hebous & Michael Keen, 2023. "Taxing cryptocurrencies," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 39(3), pages 478-497.
    2. Kpodar, Kangni & Amir Imam, Patrick, 2024. "How do transaction costs influence remittances?," World Development, Elsevier, vol. 177(C).
    3. Chen, Hongyi & Siklos, Pierre L., 2023. "Currency substitution in a world of looming retail CBDCs: Suggestive currency substitution-based evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 88(C).

    More about this item

    Keywords

    Remittances; migration; access to financial services; remittance fee; remittance cost; remittance corridor; A. remittance; panel evidence; Exchange rate arrangements; Capital controls; Plurilateral trade; Global;
    All these keywords.

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