Remittances Channel and Fiscal Impact in the Middle East, North Africa, and Central Asia

By Yasser Abdih, Ralph Chami, Christian H Ebeke, Adolfo Barajas

April 1, 2012

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Yasser Abdih, Ralph Chami, Christian H Ebeke, and Adolfo Barajas. Remittances Channel and Fiscal Impact in the Middle East, North Africa, and Central Asia, (USA: International Monetary Fund, 2012) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper identifies a remittances channel that transmits exogenous shocks, such as business cycles in remittance-sending countries, to the public finances of remittance-receiving countries. Using panel data for remittance-receiving countries in the Middle East, North Africa, and Central Asia, three types of results emerge. First, remittances appear to be strongly procyclical vis-à-vis sending country income. Second, remittances tend to be spent on consumption of both imported and domestically produced goods, rather than on investment. Third, shocks in the sending countries are transmitted via remittances to the public finances - specifically, tax revenues - of receiving countries. In the case of the 2009 global downturn, this impact was particularly strong for several countries in the Caucasus and Central Asia, whereas in the subsequent recovery in 2010 virtually all receiving countries benefitted from an upturn in remittance-driven tax revenues.

Subject: Balance of payments, Consumption, Income, National accounts, Private consumption, Remittances, Revenue administration

Keywords: Business cycle, Consumption, Global, Income, Instrumental variables, Instrumentation equation, Middle East, North Africa, Panel data, Private consumption, Private demand, Real GDP, Remittance channel, Remittance determination equation, Remittance effect, Remittance equation, Remittance flow, Remittance inflow, Remittance ratio, Remittance-recipient country, Remittances, Remittances model, Remittance-source region, Tax revenues, WP

Publication Details

Pages:

40
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/104
Stock No:

WPIEA2012104
ISBN:

9781475502947
ISSN:

1018-5941

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