Blessing or curse: The stabilizing role of remittances, foreign aid and FDI to Pakistan
Inflows of remittances to Pakistan are being increasingly viewed as a relatively attractive source of external finance, one that can help to foster development and manage economic shocks. Remittances have become a major source of revenue, surpassing the volume of FDI and official development assistance that the country receives. This study focuses primarily on the stability, cyclicality and stabilization impacts of migrant remittances to Pakistan. It is evident that foreign inflows exhibit different types of volatility; remittances are found to be a less volatile source of external finance than FDI and ODA that are counter-cyclical and stabilizing, thus serving to steady the recipient economy in times of economic downturns. ODA appears to be acyclical and stabilizing, whereas FDI emerges as pro-cyclical and destabilizing. Furthermore, remittances are insensitive to cyclical fluctuation in source countries. We also proceed with SVAR-based identification in order to examine the responses of financial flows to innovation in receiving and source economies. We confirm the counter-cyclical mechanism of remittances with Pakistani output. In particular, our results indicate that remittance flows to Pakistan are mainly due to the economic conditions in the receiving economy.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: Platz der Göttinger Sieben 3, 37073 Göttingen|
Web page: http://www.cege.wiso.uni-goettingen.de/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- El-Sakka, M. I. T. & McNabb, Robert, 1999. "The Macroeconomic Determinants of Emigrant Remittances," World Development, Elsevier, vol. 27(8), pages 1493-1502, August.
- Ale Bulir & A. Javier Hamann, 2003. "Aid Volatility: An Empirical Assessment," IMF Staff Papers, Palgrave Macmillan, vol. 50(1), pages 4.
- Dean Yang & HwaJung Choi, 2005.
"Are Remittances Insurance? Evidence from Rainfall Shocks in the Philippines,"
535, Research Seminar in International Economics, University of Michigan.
- HwaJung Choi, 2007. "Are Remittances Insurance? Evidence from Rainfall Shocks in the Philippines," World Bank Economic Review, World Bank Group, vol. 21(2), pages 219-248, May.
- Federico S. Mandelman & Andrei Zlate, 2010.
"Immigration, remittances and business cycles,"
International Finance Discussion Papers
998, Board of Governors of the Federal Reserve System (U.S.).
- Lisa Chauvet & Patrick Guillaumont, 2009.
"Aid, Volatility, and Growth Again: When Aid Volatility Matters and When it Does Not,"
- Lisa Chauvet & Patrick Guillaumont, 2009. "Aid, Volatility, and Growth Again: When Aid Volatility Matters and When it Does Not," Review of Development Economics, Wiley Blackwell, vol. 13(s1), pages 452-463, 08.
- Patrick GUILLAUMONT & Lisa CHAUVET, 2007. "Aid, Volatility and Growth Again When Aid Volatility Matters and When it Does Not," Working Papers 200707, CERDI.
- Chauvet, Lisa & Guillaumont, Patrick, 2008. "Aid, Volatility and Growth Again: When Aid Volatility Matters and When It Does Not," Working Paper Series RP2008/78, World Institute for Development Economic Research (UNU-WIDER).
- Lisa Chauvet & Patrick Guillaumont, 2011. "Aid, Volatility and Growth Again. When Aid Volatility Matters and When it Does Not," Working Papers halshs-00557123, HAL.
- Patrick Guillaumont & Lisa Chauvet, 2008. "Aid, Volatility and Growth Again. When Aid Volatility Matters and When It Does Not," Post-Print hal-00333047, HAL.
- Gottschalk, Jan, 2001. "An Introduction into the SVAR Methodology: Identification, Interpretation and Limitations of SVAR models," Kiel Working Papers 1072, Kiel Institute for the World Economy (IfW).
- Agarwal, Reena & Horowitz, Andrew W., 2002. "Are International Remittances Altruism or Insurance? Evidence from Guyana Using Multiple-Migrant Households," World Development, Elsevier, vol. 30(11), pages 2033-2044, November.
- Carlos Vargas-Silva, 2009.
"Are Remittances Manna From Heaven? A Look at the Business Cycle Properties of Remittances,"
0905, Sam Houston State University, Department of Economics and International Business.
- Vargas-Silva, Carlos, 2008. "Are remittances manna from heaven? A look at the business cycle properties of remittances," The North American Journal of Economics and Finance, Elsevier, vol. 19(3), pages 290-303, December.
- Erik Lueth & Marta Ruiz-Arranz, 2006. "A Gravity Model of Workersâ€™ Remittances," IMF Working Papers 06/290, International Monetary Fund.
- Mazhar MUGHAL & Amar Iqbal ANWAR, 2012. "Remittances, Inequality and Poverty in Pakistan: Macro and Microeconomic Evidence," Working Papers 2012-2013_2, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Aug 2012.
- Frankel, Jeffrey A., 2010.
"Are Bilateral Remittances Countercyclical?,"
4450131, Harvard Kennedy School of Government.
- Frankel, Jeffrey A., 2011. "Are Bilateral Remittances Countercyclical?," Scholarly Articles 9642640, Harvard Kennedy School of Government.
- Frankel, Jeffrey, 2010. "Are Bilateral Remittances Countercylical?," Working Paper Series rwp10-037, Harvard University, John F. Kennedy School of Government.
- Jeffrey A. Frankel, 2009. "Are Bilateral Remittances Countercyclical?," NBER Working Papers 15419, National Bureau of Economic Research, Inc.
- Marta Ruiz-Arranz & Paola Giuliano, 2005.
"Remittances, Financial Development, and Growth,"
IMF Working Papers
05/234, International Monetary Fund.
- Mazhar MUGHAL & Junaid AHMED, 2013.
"Remittances and Business Cycles: Comparison of South Asian Countries,"
2012-2013_4, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Jan 2013.
- Mazhar Y. Mughal & Junaid Ahmed, 2014. "Remittances and Business Cycles: Comparison of South Asian Countries," International Economic Journal, Taylor & Francis Journals, vol. 28(4), pages 513-541, December.
- Michel A. Robe & Stephane Pallage, 2000.
"Foreign Aid And The Business Cycle,"
Computing in Economics and Finance 2000
107, Society for Computational Economics.
- Hilde Christiane BjÛrnland, 2000. "Detrending methods and stylized facts of business cycles in Norway - an international comparison," Empirical Economics, Springer, vol. 25(3), pages 369-392.
- Jordi Galí, 1992. "How Well Does The IS-LM Model Fit Postwar U. S. Data?," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 709-738.
- Mazhar Y. Mughal, 2013. "Remittances As Development Strategy: Stepping Stones Or Slippery Slope?," Journal of International Development, John Wiley & Sons, Ltd., vol. 25(4), pages 583-595, 05.
- Kuckulenz, Anja & Buch, Claudia M., 2004. "Worker Remittances and Capital Flows to Developing Countries," ZEW Discussion Papers 04-31, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Junaid Ahmed, 2012. "Cyclical Properties of Migrant's Remittances to Pakistan: What the data tell us," Economics Bulletin, AccessEcon, vol. 32(4), pages 3266-3278.
- Yan Sun & Udo Kock, 2011. "Remittances in Pakistan; Why have they gone up, and why Aren't they coming down?," IMF Working Papers 11/200, International Monetary Fund.
- Canova, Fabio, 1998. "Detrending and business cycle facts: A user's guide," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 533-540, May.
- Serdar Sayan, 2006. "Business Cycles and Workers' Remittances; How Do Migrant Workers Respond to Cyclical Movements of GDP At Home?," IMF Working Papers 06/52, International Monetary Fund.
- Canova, Fabio, 1993.
"Detrending and Business Cycle Facts,"
CEPR Discussion Papers
782, C.E.P.R. Discussion Papers.
- repec:dau:papers:123456789/5400 is not listed on IDEAS
- Christopher A. Sims, 1986. "Are forecasting models usable for policy analysis?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-16.
- Mazhar Yasin mughal & Farid Makhlouf, 2011. "Volatility of Remittances to Pakistan: What do the Data Tell?," Economics Bulletin, AccessEcon, vol. 31(1), pages 605-612.
- Lucas, Robert E B & Stark, Oded, 1985. "Motivations to Remit: Evidence from Botswana," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 901-18, October.
- Åule Akkoyunlu & Konstantin A. Kholodilin, 2008. "A Link Between Workers' Remittances and Business Cycles in Germany and Turkey," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 44(5), pages 23-40, September.
When requesting a correction, please mention this item's handle: RePEc:zbw:cegedp:153. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.