Remittances in Times of Uncertainty: Understanding the Dynamics and Implications

Patrick Imam (), Kangni Kpodar, Djoulassi Oloufade and Vigninou Gammadigbe

No 2024/244, IMF Working Papers from International Monetary Fund

Abstract: This paper delves into the intricate relationship between uncertainty and remittance flows. The prevailing focus has been on tangible risk factors like exchange rate volatility and economic downturn, overshadowing the potential impact of uncertainty on remittance dynamics. Leveraging a new dataset of quarterly remittances combined with uncertainty indicators across 77 developing countries from 1999Q1 to 2019Q4, the analysis highlights that uncertainty in remittance-sending countries negatively affects remittance flows. In contrast, uncertainty in remittance receiving-countries has a more complex, dual effect. In countries with high private investment ratios, rising domestic uncertainty leads to a decline in remittances. Conversely, in countries with low public spending on education and health, remittances increase in response to uncertainy, serving as a social safety net. The paper underscores the heterogeneous and non-linear effects of domestic uncertainty on remittance flows.

Keywords: Remittances; Uncertainty; Shocks; remittance flow; remittance dynamics; IRF of remittance; remittances in times; uncertainty indicator; Migration; Private investment; Health care spending; Global (search for similar items in EconPapers)
Pages: 39
Date: 2024-11-22
New Economics Papers: this item is included in nep-dev, nep-fdg and nep-mig
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