Remittances,Institutions and Growth in Africa

Remittances have become an important source of external finance in many developing countries. This article examines the relationship between remittances, institutions and economic growth in a panel of 26 African countries over the period 1980–2014. We apply the fixed effects (FE) and the two‐step system generalized method‐of‐moments (GMM) estimation methods. Our results show that there is a positive relationship between remittances and growth. We also find that institutions are an important determinant of economic growth. The interaction terms have a positive and statistically significant effect on economic growth. Thus, the growth effect of remittances is enhanced in the presence of strong institutions. Strong institutions are therefore germane in attracting greater remittance inflows to African countries. A clearer understanding of the channels through which remittance flows will enhance growth in African economies may assist policymakers to craft appropriate policies. In particular, a policy environment that promotes strong institutions would serve to attract more remittances.     

Remittances and Other Financial Flows to Developing Countries

Official estimates of migrants’ remittances are around US$100 billion annually, with some 60 per cent going to developing countries. Any policy making use of migrants as a development resource must understand the size and allocation of remittances, and the roles played by migrants and their communities in the remittance process. This paper examines the flows of remittances in relation to other financial flows to developing countries. The examination is based on data available from official statistics. As discussed in the paper, remittances by unofficial channels are significant by all accounts so the remittance amounts reported here are quite conservative. The paper shows that annual remittances to developing countries have more than doubled between 1988 and 1999. Viewed over the last decade, remittances have been a much larger source of income for developing countries than official development assistance (ODA). The gap is increasing, since ODA has been falling while remittances have increased. Furthermore, remittances appear to be a much more stable source of income than private flows, both direct and portfolio, which tend to be more volatile and flow into a limited set of countries. Remittances to developing countries go first and foremost to lower middleincome and low–income countries. Lower middle–income countries receive the largest amounts, but remittances constitute a much higher share of total international flows to low–income countries. Of the ten countries receiving most remittances, two are low–income (India and Pakistan); six are lower middle–income (Philippines, Turkey, Egypt, Morocco, Thailand, and Jordan); and two are upper middle–income (Mexico and Brazil). Sub–Saharan Africa received some 8 per cent of remittances in 1980, but only some 4 per cent in 1999. South Asia’s share also declined from what was already a relatively high 34 to 24 per cent. Those who gained most were Eastern Europe and Central Asia, South and Central America, and the Caribbean, which increased their share of global remittances.     

Determinants of remittances in Egypt: Do macroeconomic instability and oil price matter?

Emigration and resulting voluminous remittance inflows have been noticeable features of the Egyptian economy since the 1960s. The main purpose of this study is to investigate the determinants of remittances – primarily the role of both macroeconomic instability and oil price – in Egypt. Using autoregressive distributed lag (ARDL) bounds testing procedure, we estimated a remittance determination equation over the period from 1980 to 2015 and found that: (1) macroeconomic instability in Egypt and increases in international oil prices promote remittances; (2) GDP growth rate in the host countries and depreciation of domestic currency spur remittances; (3) financial development is inversely related to remittances, implying that remittances and financial development are substitutes; (4) GDP growth in the home country is not significantly associated with remittances.     

Workers’ Remittances and Domestic Investment in South Asia: A Comparative Econometric Inquiry

This study explores the effect of workers’ remittances on domestic investment in four selected South Asian countries: Bangladesh, India, Pakistan, and Sri Lanka, using contemporary time series estimation techniques from 1980 to 2017. The estimated results of the ARDL bounds approach to cointegration analysis have revealed that among selected South Asian countries, Pakistan has witnessed a significant negative effect in the long run. Similarly, the findings of other forms of capital flows also revealed varying effects across the countries considered. This study urges the transformation of aggregate economic behaviour from consumption to the production side, by adopting policies that would encourage domestic saving and investment activities. In this regard, among others, reduction in the interest rate and the interest rate spread would be beneficial. It urges the identification of factors that conditions varying effect of workers’ remittances and other capital inflows to mitigate negative effects into positive.     

Migrant remittances and development

Income remittances from migrant workers to countries of origin are central to the links between migration and development. Multiple, complex, and diverse forces, however, affect the flow of remittances. Factors may include the number and characteristics of workers abroad; levels and types of economic activity in sending and host countries; differential wage, exchange, and interest rates; political risk; and the facility for transferring funds. These factors then shape personal decisions made by migrants and their families regarding remittances, after which any longer-range development consequences of remittances may result. Debate rages over the effects of remittances on development. This paper therefore reviews papers on the measurement of remittances and gives recent findings on the volume and direction of flows. It continues by considering evidence on the uses of remittances and their consequences for development, and closes with a discussion of policy options for increasing and channeling remittance flows.     

The resilience of migrant money: how gender,generation and class shape family remittances in Peruvian migration

Scholars and policy makers have argued that because altruism drives remittance sending, migrant money is more resilient to uncertainty than other capital flows. In this article, I question this assumption through ethnographic examination of remittance sending by Peruvian migrant families. When in their lives do Peruvian migrants start to remit? Who are the recipients? What is the purpose of their remittances? How long do they last and why do they stop? I argue that, to answer these questions, we need to investigate how migrants make remittance commitments to different household members, how these attribute value to the remittances and how this value becomes the object of negotiation and contestation. The findings indicate that remittances reinforce existing relations of gender, generation and class in Peruvian society and suggest that while short‐lived remittances are based on contractual commitments and driven by altruism, long‐term remittances are based on emotional commitments and driven by both non‐utilitarian and utilitarian motives.     

Remittances,Business Cycles and Poverty: The Recent Turkish Experience

We investigate whether remittances sent to Turkey by Turkish workers living in Germany are countercyclical or procyclical with Turkish and German national outputs and discuss possible reasons underlying the resulting patterns and their implications. We also take up a previously unexplored issue and discuss poverty alleviation potential of remittances at a macroeconomic level by examining the statistical properties of any co‐movements between remittances cycles and cycles in consumption spending on food and durable goods in Turkey. Our results reveal that real remittance flows from Germany to Turkey move procyclically with the real output in Turkey, and are primarily driven by (largely independent of) the developments in the Turkish economy (German economy). We also find that remittances cycles remain procyclical to the consumption cycles throughout our sample period. This direct co‐movement between the two cycles becomes synchronous, however, only after a phase shift occurring around 1992, pointing to the increasing role of the level of economic activity in Turkey as the leading determinant of remittance receipts from Germany and the declining strength of consumption smoothing motive over time. Our results all together point out a low potential for remittances sent from Germany to reduce poverty in Turkey, at least as far as the past fifteen years are concerned.     

Overseas workers' remittances in Asian development

In recent years, overseas workers from Asia have been sending remittances of about $8 billion annually to their home countries. These remittances are an important source of precious foreign exchange for the major labor-exporting countries. The overall development impact of remittances, however, has not been well established. Remittances are spent primarily on day-to-day consumption expenditures, housing, land purchase, and debt repayment. Although only a small proportion of remittances are directed into productive investments, this does not warrant the conclusion that the developmental value of remittances is negligible. In fact, remittances spent on domestic goods and services Asia provide an important stimulus to indigenous industries and to the economies of the labor supplying countries. It is these broader macroeconomic benefits of remittances which seem to have been largely ignored in the literature, and this perhaps explains the pessimistic view of the developmental value of remittances. Reservations concerning the effects of remittance on the sending countries include the fears that 1) expenditure patterns of remittance receiving households may create a demonstration effect whereby nonmigrant households may increase consumption, 2) remittance inflow will increase income and wealth inequalities, 3) remittance expenditures may result in inflation, 4) remittances may produce only short-term fluctuations in long-term economic development, and 5) remittances may adversely affect agricultural development.     

A Model of Migrants' Remittances with Human Capital Investment and Intrafimilial Transfers1

This study analyzes data on migrants' remittances using a two‐period theory of intergenerational transfers based on an informal, intrafamilial loan arrangement using “weak altruism,” a behavior between “strong altruism” and pure self‐interest. The model provides an integrated theory of migrants' remittances, human capital investment decisions, and intrafamilial transfers applicable to low‐income countries with no official pension schemes and imperfect capital markets. Propositions, derived from the theory, are tested, re‐analyzing original survey data on remittances of Pacific island migrants in Sydney. When weak altruism and strong altruism yield opposite predictions, the econometric results tend to confirm the former hypothesis and invalidate the latter.     

The impact of labor migration on the Jordanian economy

"This article considers the effects of labor migration on the economy of the East Bank of the Hashemite Kingdom of Jordan. The article is presented in two sections. The first attempts to quantify the external migrant flows which impinge on the Jordanian labor market. The second section presents a theoretical model of the macroeconomic impact on output and employment of flows of migrants and migrants' remittances and an empirical analysis of the effects on the agricultural and construction sectors."     

The Effect of Remittances on Economic Growth in Kyrgyzstan and Macedonia: Accounting for Financial Development

Kyrgyzstan and Macedonia have experienced a reasonable increase in remittances over the last twenty‐five years. Subsequently, the extent to which remittances can be instrumental for economic development of the two countries has gained serious attention in recent development dialogues. The aim of this study is to examine the impact of remittances versus financial development on the economic growth of the two counties, complementing the burgeoning interest and focus on remittances for policy. The short‐run and the long‐run effects and the causality dynamics of remittances and financial development, are explored. The results show a long‐run positive impact of remittances on the economic growth of these countries. The impact of financial development is negative, significant only for Kyrgyzstan and not statistically significant for Macedonia. The causality results show that remittances support economic growth for Kyrgyzstan, whereas economic growth appears to propel remittances for Macedonia.     

The Impact of Temporary Migration on Source Countries

We quantify the home country effects of different types of temporary and permanent migration patterns using a global integrated model for three developing countries. Our results suggest that migration (whether permanent or temporary) is beneficial for income as well as for poverty reduction in the home countries as it raises remittances, labor productivity, trade, and foreign direct investment and it provides incentives for human capital accumulation. These channels offset the negative impact of “brain drain.” In the simulations, temporary migration programs yield better outcomes than permanent migration due to the productivity gains induced in the home countries by returning migrants.     

Effects of Macroeconomic Uncertainty on Investment and Economic Growth: Evidence from Pakistan

The relationship between macroeconomic uncertainty, investment and economic growth is an empirical issue in developing countries. This paper investigates the effects of macroeconomic uncertainty on investment and economic growth in Pakistan for the period 1975–2008 by using the accelerator model of investment and endogenous growth model. The conditional variances, directly estimated through the Generalized Autoregressive Conditional Heteroscedasticity (GARCH) model is utilized for erecting the uncertainty variables related to fiscal policy, openness and foreign capital inflows. The results clearly indicate that the macroeconomic uncertainty have significant negative effects on investment and per capita income of Pakistan. We conclude that a reduction in macroeconomic uncertainty through appropriate fiscal and monetary policy, stability in capital inflows and improved trade performance could result in high investment and sustainable economic growth in the country.     

The Economics of Transnational Living1

Migrants' long‐distance economic relations with their homelands have been the subject of an extensive, albeit fragmented, multidisciplinary inquiry. Most existing studies have been primarily concerned with the north‐south flow of monetary remittances that migrants send to their homelands. Using a transnational perspective informed by economic sociology tenets, this article argues that this north‐south, monetary‐centered approach is too limited, for it fails to heed the multiple macroeconomic effects of migrants' transnational economic and noneconomic connections and, thus, underestimates migrants' agency and their influence at the global level. Using the concept of transnational living, the study presents new vistas of transnational migration that question accepted notions about the relationship between labor mobility and capital mobility.     

Come Back or Stay? Spend Here or There? Return and Remittances: The Case of Moldova

This paper examines the determinants and consequences of temporary and permanent migration from the perspective of migrant source countries. Based on a large and detailed household dataset on migration in the Republic of Moldova, the most important factors that influence a respective migrant’s decision whether to return to the home country or to stay abroad for good are presented first. Second, the remittance behaviour of temporary and permanent migrants is analysed to investigate how developing countries benefit from either type of migration. The results indicate that the most important determinants of permanent migration relate to the economic conditions at home and abroad, as well as to the legal status of a migrant in the host country. Furthermore, economic and political frustration plays an important role in the decision of permanent migrants not to come back. On the contrary, family ties as measured by the number of close family members at home act as a pull factor for migrant return. Interestingly, permanent migrants use source country networks that differ from those of temporary migrants, indicating that the return decision of individuals is influenced by the decision of their migrant peers. Concerning remittances, the results reveal that, in absolute terms, temporary migrants remit around 30 per cent more than their permanent counterparts. This outcome is surprising, because temporary migrants often reside in countries where wages are much lower. Overall, the findings indicate that when compared to permanent migration, temporary migration is favourable for developing countries, as it fosters not only repatriation of skills, but also higher remittances, and home savings.     

Migrants' remittances and their use

This report, prepared at the request of the Organization for Economic Cooperation and Development (OECD), examines how remittances flow from employing countries to migrants' countries of origin and how they are used. The migrants examined largely come from Morocco, Turkey, Tunisia, Yugoslavia, Algeria, Portugal, Spain, and Italy, and work in France, Germany, Belgium, Austria, Sweden, and The Netherlands. Part 1 of the paper collects basic data on the finance flows formed by migrants' remittances, as measured by the balances of payment of the countries exporting and receiving manpower. These flows are related to such concepts as savings for real tranfers. The article also analyzes their composition, evolution over the past decade, and economic significance. Part 2 examines the use to which funds transverred and brought home from abroad are put by the income-producing migrants. Reports, field surveys, and expert communications supply data to examine whether such capital is invested to aid economic development. Part 3 explains how financial and economic flows from employing countries can play a positive role in the the development of the countries of origin and how international cooperation can assist. Recent changes in the migration policies of the main countries of employment, which now offer incentives to foreign manpower to encourage their return to emigrating nations, make the topic of this report especially timely.     

Refugee remittances: conceptual issues and the Cuban and Nicaraguan experiences

"This article assesses the notion that the determinants of remittances generated by refugee flows, particularly from Communist-inspired systems, are different from those associated with labor migrations....These differences have a major bearing on how labor migrants and refugees perceive their relationship with countries of origin. The propensity of labor migrants to dissociate themselves from the home country is considerably less than among refugees whose perceptions are mediated by opposition to the ruling regime and other factors, such as political relations between refugee-sending and refugee-receiving countries and whether or not there has been a regime change or one is expected to occur. The conceptual issues elaborated here are based on the Cuban-American experience, but also reflect an assessment of Nicaraguan emigration during the 1980s."     

The Role of Migrant Remittances in Development: Evidence from Mediterranean Countries

Given the persistent problems in the balance of trade in LDCs, the limited effect of foreign aid, and the difficulties of borrowing, the often huge amounts of migrant remittances can substitute for the inadequacies of these forms of foreign exchange. As market flows of foreign exchange, remittances have complex positive and negative effects on development. In this paper, I deal with this role of migrant remittances in the theoretical framework of development economics, as related to the importance of foreign exchange as an indispensable factor of growth and structural change in LDCs. Various channels transmitting the impact of remittances on development are investigated based on the experience of countries from both sides of the Mediterranean basin.     

How Do Workers’ Remittances Respond to Lending Rates?

The literature on migrants’ motivation to remit ranges from self‐interest to altruism where studies analyse the impact from home country interest rates or interest differentials between home and host countries. We reinterpret the interest rate elasticity of remittances as a form of debt‐repayment responsiveness rather than based on opportunistic motivation. Modelling altruistic transfer and debt‐repayment, we find that, for a panel of countries, the long‐run responsiveness of remittances to changes in real lending rates is negative. This suggests that an expansionary (contractionary) monetary policy is most likely to lead to an increase (reduction) in remittances in the long‐run. In contrast to this, the short‐run impact of interest rate changes on remittances is positive.     

The Impact of Migrant Remittances on School Attendance and Education Attainment: Evidence from Jordan

This paper evaluates the impact of migrant remittances on human capital accumulation among youth. An augmented human capital model with two outcomes, education attendance and education attainment, is estimated using a large nationally representative household survey from Jordan. Empirical results show that migrant remittance receipt has a positive effect on education attendance. This finding is obtained while controlling for other socio‐economic determinants of schooling behavior and is robust to censorship and endogeneity bias. The results also indicate that the magnitude of the remittance impact on both education outcomes is larger for men compared with that of women.