The Impact of Remittances on Economic Activity: The Importance of Sectoral Linkages

By Hector Perez-Saiz, Jemma Dridi, Tunc Gursoy, Mounir Bari

August 16, 2019

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Hector Perez-Saiz, Jemma Dridi, Tunc Gursoy, and Mounir Bari. The Impact of Remittances on Economic Activity: The Importance of Sectoral Linkages, (USA: International Monetary Fund, 2019) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We propose a simple macroeconomic model with input-output sectoral linkages based on Acemoglu et al. (2016) to quantify how changes in aggregate demand due to additional income from household’s remittances propagates through the network of input-output linkages in Sub-Saharan African countries. We first propose two network centrality measures to assess the role of some sectors as key input providers in the economy. Then, we use these measures to quantify the effect of sectoral linkages on sectoral and total output following an increase in remittances inflows. Our empirical results suggest that the effects of remittances on recipient economies increase with the degree of linkages across sectors, which is especially prominent in the case of the financial intermediation sector. Our paper contributes to the emerging macroeconomic literature on the propagation of shocks across sectors and the implications for the whole economy.

Subject: Balance of payments, Consumption, Income, Labor, Labor supply, National accounts, Production, Production growth, Remittances

Keywords: Africa, Centrality, Consumption, Economic growth, Income, Labor supply, Networks, Production growth, Remittances, Remittances data, Remittances flow, Remittances inflow, Remittances inlows, Remittances matter, Remittances receipts, Remittances recipient, Remittances transaction, Remittance-sending country, SSA economy, Sub-Saharan Africa, WP

Publication Details

Pages:

37
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/175
Stock No:

WPIEA2019175
ISBN:

9781498324489
ISSN:

1018-5941

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