Analyzing Cycles in Remittances and Foreign Direct Investment: Evidence from the Philippines

Puneet Vatsa, Sokchea Lim and Hem C. Basnet ()
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Hem C. Basnet: Lincoln University, New Zealand

Review of Development Finance Journal, 2022, vol. 12, issue 2, 10-17

Abstract: This paper is devoted to analyzing the associations between business cycles, remittances, and foreign direct investment (FDI), using data from the Philippines. First, we use the Hamilton filter to isolate the cyclical components of the three variables; then, we use time-difference analyses to examine whether remittances and FDI are acyclical, procyclical, or countercyclical. The results show that remittances are procyclical and move contemporaneously with business cycles. However, the evidence regarding the cyclicality of FDI is mixed. Furthermore, FDI and remittances are uncorrelated. Our findings do not support the view that remittances are motivated by altruism; instead, they suggest that a profit motive drives remittances.

Keywords: Remittances; foreign direct investment; business cycles; Philippines (search for similar items in EconPapers)
JEL-codes: C22 F21 F24 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:afj:journ3:v:12:y:2022:i:2:p:10-17

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