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Workers’ Remittances and International Tjalling C. Koopmans Research Institute

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  • M. Hadzi-Vaskov

Abstract

One of the most important potential benefits from the process of international financial integration is the opportunity it offers for diversification of macroeconomic risks internationally. In turn, the cross- border diversification of portfolio holdings is widely considered to be the major driving force behind this process. The present paper offers a complement to this literature. It identifies workers’ remittance flows to developing countries as an important channel through which the process of international risk-sharing might take place. Using a panel dataset that includes most developing countries during the period 1990-2000, this study demonstrates that countries which receive above-average levels of workers’ remittances achieve higher degrees of international risk-sharing in consumption. Moreover, this effect is not uniform across different groups of developing countries, being the strongest in transition economies.

Suggested Citation

  • M. Hadzi-Vaskov, 2006. "Workers’ Remittances and International Tjalling C. Koopmans Research Institute," Working Papers 06-19, Utrecht School of Economics.
  • Handle: RePEc:use:tkiwps:0619
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    File URL: https://dspace.library.uu.nl/bitstream/handle/1874/37227/06-19.pdf
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    References listed on IDEAS

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    1. Karen K. Lewis, 1999. "Trying to Explain Home Bias in Equities and Consumption," Journal of Economic Literature, American Economic Association, vol. 37(2), pages 571-608, June.
    2. Sorensen, Bent E. & Wu, Yi-Tsung & Yosha, Oved & Zhu, Yu, 2007. "Home bias and international risk sharing: Twin puzzles separated at birth," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 587-605, June.
    3. Lewis, Karen K, 1996. "What Can Explain the Apparent Lack of International Consumption Risk Sharing?," Journal of Political Economy, University of Chicago Press, vol. 104(2), pages 267-297, April.
    4. 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.
    5. Baxter, Marianne & Jermann, Urban J, 1997. "The International Diversification Puzzle Is Worse Than You Think," American Economic Review, American Economic Association, vol. 87(1), pages 170-180, March.
    6. de Luna Martinez, Jose, 2005. "Workers'remittances to developing countries : a survey with central banks on selected public policy issues," Policy Research Working Paper Series 3638, The World Bank.
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    Citations

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    Cited by:

    1. Balli, Faruk & Rana, Faisal, 2015. "Determinants of risk sharing through remittances," Journal of Banking & Finance, Elsevier, vol. 55(C), pages 107-116.
    2. 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.
    3. Malin Gardberg, 2016. "Determinants of International Consumption Risk Sharing in Emerging Markets and Developing Countries," EcoMod2016 9452, EcoMod.
    4. Nnyanzi John Bosco, 2015. "Financial Openness, Capital Flows and Risk Sharing in Africa," Global Economy Journal, De Gruyter, vol. 15(1), pages 51-82, March.
    5. John Bosco Nnyanzi, 2015. "Welfare gains, risk-sharing and Africa’s monetary union projects," African Journal of Economic and Management Studies, Emerald Group Publishing, vol. 6(4), pages 416-430, December.

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