Heterogeneity in the long-run remittance-output relationship: Theory and new evidence

John Francois, Nazneen Ahmad, Andrew Keinsley and Akwasi Nti-Addae

Economic Modelling, 2022, vol. 110, issue C

Abstract: The existing literature focuses extensively on the macroeconomic impact of remittances. Yet, the plausible heterogeneity in the remittance-output relationship is understudied. Different country characteristics and mediating factors of remittances suggest that the remittance-output relationship may vary across countries. Uncovering this cross-country heterogeneity can help tailor country-specific policies in managing the aggregate effects of remittances. We use panel data for 80 developing countries over 1970–2014 to systematically study the heterogeneous long-run remittance-output relationship. We find that an increase in remittances is associated with a marginal increase in long-run output on average. This, however, conceals a large cross-country heterogeneity, which uncovers that the impact of remittances on output varies from 0.59% in Dominican Republic to −0.53% in Bosnia and Herzegovina. Differences in the size/sign of the impact of remittances on consumption and investment across countries explain this variation. This cautions against a one-size-fits-all argument for the aggregate impact of remittances.

Keywords: Remittances; Output; Heterogeneous panel cointegration; Open-economy; Long-run (search for similar items in EconPapers)
JEL-codes: E1 E20 F24 F43 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:110:y:2022:i:c:s0264999322000396

DOI: 10.1016/j.econmod.2022.105793

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