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On interactions between remittance outflows and Saudi Arabian macroeconomy: New evidence from wavelets

Salem Hathroubi () and Chaker Aloui

Economic Modelling, 2016, vol. 59, issue C, 32-45

Abstract: The effect of workers' remittance outflows on macroeconomic variables of host countries is a controversial issue. The purpose of this paper is to study lead/lag interactions between workers' remittance outflows and macroeconomic leading variables in Saudi Arabia for 1980–2013 within a time–frequency framework. To this end, we perform three wavelet variants, namely, the wavelet power spectrum, the cross-spectrum wavelet, and the coherence wavelet. We show that remittance outflows are strongly associated with the main Saudi aggregates and that their relationships change across time scale and frequency bands. In the short- and mid-term, real output growth and government expenditures guide remittance outflows. More specifically, government expenditures positively affect remittance shares to real outputs. In addition, the wavelet analysis reveals a positive causality link from the active population to remittances over low-frequency bands. These outcomes have several prominent implications and point to practical recommendations in terms of monetary policy coordination and financial stability.

Keywords: Workers' remittances; Economic growth; Government expenditures; Wavelets (search for similar items in EconPapers)
JEL-codes: C02 C63 E27 F22 F24 (search for similar items in EconPapers)
Date: 2016
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