DO WORKERS’ REMITTANCES PROMOTE CONSUMPTION STABILITY IN EGYPT?

Omneia Helmy, Chahir Zaki and Aliaa Abdallah

Applied Econometrics and International Development, 2020, vol. 20, issue 2, 127-144

Abstract: This paper examines cyclical characteristics of remittances and explores their counterbalancing and consumption-smoothing potential. First, it uses quarterly data to better reflect the short-term dynamics of consumption and remittances. Second, it uses different methodologies to examine whether the results are robust or not, namely OLS, VAR and SVAR. Third, to control for the endogeneity of remittances, we use a Generalized Method of Moments technique by instrumenting remittances. Finally, we apply this on the Egyptian case since studies on the MENA region in this field are quite rare. Our main findings show that there is a significant consumption smoothing effect of remittances. Moreover, we found that, even when the endogeneity of remittances is controlled for, this consumption smoothing effect remain robust. This finding is robust under a battery of sensitivity tests.

Keywords: Egypt; remittances; business cycle; consumption smoothing. (search for similar items in EconPapers)
JEL-codes: C5 E32 F22 F24 (search for similar items in EconPapers)
Date: 2020
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