Bilateral Remittance Inflows to Asia and the Pacific: Countercyclicality and Motivations to Remit

Kijin Kim, Zemma Ardaniel, Aiko Kikkawa and Benjamin Endriga
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Kijin Kim: Asian Development Bank Institute
Zemma Ardaniel: Asian Development Bank Institute
Aiko Kikkawa: Asian Development Bank Institute
Benjamin Endriga: Asian Development Bank Institute

No 1315, ADBI Working Papers from Asian Development Bank Institute

Abstract: We examine the countercyclicality of remittance inflows to the countries in Asia and the Pacific. We also identify major determinants of remittances using gravity models of bilateral remittances. We find that bilateral remittance inflows are countercyclical against the business cycle of a remittance-receiving country relative to a sending country. The degree to which remittances are countercyclical is found to vary significantly by subregion: Central Asia and Southeast Asia, including many remittance-dependent countries, show stronger countercyclicality than other subregions. The estimated models suggest that migrant stock is a top determinant of remittances, and that an increase in bilateral remittances is explained by a higher occurrence of disasters caused by natural hazards in receiving countries, appreciation of a receiving country’s currency value against that of the sending country, lower interest rate differential (receiver–sender), greater capital account openness and higher political instability, and lower costs of remittances. This suggests that an altruistic motivation to remit prevails in the region. We also find that the countercyclicality of remittances rises when recipient countries experience more frequent disasters, a higher old-age dependence ratio, less stringent capital control, and stable political climate.

Keywords: remittances; Asia and the Pacific; countercyclicality; business cycle; gravity model (search for similar items in EconPapers)
JEL-codes: C23 F24 F44 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2022-05
New Economics Papers: this item is included in nep-fdg, nep-int, nep-opm, nep-pay and nep-sea
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Citations: View citations in EconPapers (1)

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