Do remittances condition the relationship between trade and government consumption?

Kevin Williams

Applied Economics Letters, 2021, vol. 28, issue 18, 1571-1577

Abstract: This paper used a panel model and 99 developing economies over the 1980–2018 period to investigate the effect that remittances had on the relationship between trade and government consumption. We showed that remittances mediate the relationship between trade and government consumption. We documented that in high remittance recipient countries, trade negatively affected government consumption. In low remittance recipient countries, by contrast, we found that trade positively affected government consumption. Our results suggested that remittances can reduce the fiscal cost on government budget associated with adverse trade shocks. We proposed two policy responses for remittance recipient countries.

Date: 2021
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DOI: 10.1080/13504851.2020.1834072

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