Remittances in Russia and Caucasus and Central Asia: the Gravity Model

July 17, 2020

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Format: Chicago

Tigran Poghosyan. Remittances in Russia and Caucasus and Central Asia: the Gravity Model, (USA: International Monetary Fund, 2020) 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

Remitances are an important source of external financing in low- and middle-income countries. This paper uses the gravity model to analyze remittance flows in Russia and Caucasus and Central Asia (CCA) countries. Standard gravity determinants, such as GDP in sending and recieiving countries, bilateral distance, existence of common borders and common official language, fit remittance flows well. Remittances also react to inflation and exchange rate movements in recipient countries to sustain their purchasing power. In line with the altruism hypothesis, remittances flow to countries with higher age dependency ratio. Remittances are countercyclical and help stabilize outputs in recipient countries. However, global shocks resulting in sharp output losses of sending countries would lead to large volatility and decline of remittance inflows in recipient countries. The results of the analysis can be used to assess the impact of the COVID-19 shock on projected remittance flows into CCA.

Subject: Balance of payments, Econometric analysis, Exchange rates, Foreign exchange, Gravity models, Migration, Oil prices, Outward remittances, Population and demographics, Prices, Remittances

Keywords: Bilateral remittance, Central Asia and the Caucasus, Country, Country j, Exchange rates, Global, Gravity model, Gravity models, International remittances, Migration, Oil prices, Outward remittances, Pair level, Recipient country, Remittance, Remittance flow, Remittances, Sending country, WP

Publication Details

Pages:

23
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2020/128
Stock No:

WPIEA2020128
ISBN:

9781513550206
ISSN:

1018-5941

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