Remittance Stability, Cyclicality and Stabilizing Impact in Developing Countries
That remittances are a stable source of external finance seems to have become the received wisdom. In addition, many studies have found remittances to behave counter-cyclically, increasing during crises and times of hardship for the recipient count...
| Main Authors: | , |
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| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20091014134511 http://hdl.handle.net/10986/4269 |
| Summary: | That remittances are a stable source of
external finance seems to have become the received wisdom.
In addition, many studies have found remittances to behave
counter-cyclically, increasing during crises and times of
hardship for the recipient countries. Are remittances
reliable macroeconomic stabilizers? To answer this question,
the present study examines the stability, cyclicality, and
stabilizing impact of remittances in comparison with the
same three features for other foreign-exchange inflows,
namely foreign direct investment and official development
aid. The analysis is performed at the country and regional
levels rather than at the aggregate or global level (on
which much of the received wisdom rests), because
policymakers are concerned with the impact of remittances in
their country rather than at the global level. The main
findings for 1980-2007 are that in a majority of countries:
i) official development aid is more stable than remittances,
and remittances are more stable than foreign direct
investment; ii) official development aid is
counter-cyclical, while remittances are pro-cyclical,
although less so than foreign direct investment; and iii)
official development aid is stabilizing and remittances are
destabilizing, although less so than foreign direct
investment. The paper suggests that it is necessary to
examine counter-cyclicality separately from the stabilizing
impact, as the former does not seem to always imply the latter. |
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