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The paper seeks to assess the macroeconomic implications of large-scale inward remittances for a small open economy. By including remittances in several standard models, the paper concludes that the overall macroeconomic impact of remittances is likely to be ambiguous. The impact depends on the structural characteristics of the receiving country, in particular its consumption and investment patterns, and its capacity to manage large financial inflows. As data deficiencies and methodological problems associated with remittances preclude crosscountry empirical investigation, the paper illustrates these findings with data on Tajikistan, where remittances as a share of GDP are among the highest in the world. The paper also evaluates the pros and cons of remittances in a broader political economy context.

This paper creates the first dataset of bilateral remittance flows for a limited set of developing countries and estimates a gravity model for workers' remittances. We find that most of the variation in bilateral remittance flows can be explained by a few gravity variables. The evidence on the motives to remit is mixed, but altruism may be less of a factor than commonly believed. Most strikingly, remittances do not seem to increase in the wake of a natural disaster and appear aligned with the business cycle in the home country, suggesting that remittances may not play a major role in limiting vulnerability to shocks. To encourage remittances and maximize their economic impact, policies should be directed at reducing transaction costs, promoting financial sector development, and improving the business climate.

Several economies in the Caribbean region, especially from the lower income group, are highly dependent on remittances. Between 1991 and 2006, the combined flows of total remittances reaching the Caribbean have seen almost a 17% average annual growth rate, surpassing USD 6billion in 2005 and overtaking ODA and FDI into the region. In addition, remittances represent more than 20% of the domestic gross domestic product (GDP) in some Caribbean countries and have played a significant role in lessening both balance of payment deficits and the impact of natural disasters to which the region is particularly vulnerable. Given the importance of such remittance flows, this study undertakes an analysis of the various dynamics underlying the Canada-Caribbean remittance corridor, including Caribbean migration issues, remittance market landscapes and regulatory frameworks. This study is intended to assist Canadian and Caribbean national authorities in their mandate of providing incentives for the continued growth and competitiveness of their remittance industries, while protecting remittance markets from being abused by criminals.

Workers' remittances have been playing an increasingly important role in the balance of payments of many countries and can significantly contribute to the strength of their external positions. Assessing the likely stability of remittance flows could be a valuable input to the analysis of their external vulnerabilities. This paper argues that \"altruism,\" as a motive to send money home, would contribute to the stability of these flows. Using a simple framework that relates workers' remittances to agricultural GDP, which is used as an indicator of economic \"hardship\" in the home country, evidence suggests that altruism could have played an important role in the flow of remittances to Egypt, Jordan, Morocco, Pakistan, and Tunisia in recent years.

Empirical studies that use self-reported data on remittances to measure the latter's impact on microeconomic incentives mostly ignore the potential errors associated with reporting/measurement issues. An econometric procedure to control for these errors is developed and applied to household-level data from Armenia. We find evidence of systematic under-reporting of remittances. After controlling for this, we find a strong negative impact of remittances on incentives to work.

In Malaysia, Indonesian migrants are showing an increasingly clear preference for informal transfer mechanisms compared to their counterparts in other countries. A little less than half of all Indonesian migrants overseas—thought to be around 2 million—are working in Malaysia. An increasing number of migrants are women, and the corridor is also marked by a high number of undocumented migrants. Despite the increasing flows of migrants, only about 10 percent of the estimated flow of remittances into Indonesia from Malaysia is transferred through the formal system. The extent of the preference for the informal sector is unique in this corridor. Indonesian migrants in other countries are using the formal sector far more than the migrants in Malaysia. In addition, Indonesian women and undocumented migrants in Malaysia especially find formal sector transfers either hard to access or inappropriate for their needs. To this end, the study assists policymakers’ efforts to increase the impact of remittances on economic development and poverty reduction in Indonesia and to investigate options for attracting more migrants to use the formal financial sector. The report provides a descriptive overview of the Malaysia–Indonesia remittance corridor and suggests policy avenues for improving access to formal remittance transfer channels; increasing the transparency of the flows and the cost structure; and facilitating remittance transfers, particularly for undocumented and female migrant workers.

Serbia has become one of the largest remittance-recipient countries in the world. It is estimated that in 2004 Serbia received US2.4 billion dollars in remittances from Serbian workers in Germany, the United States, Austria, Switzerland, Italy, and other countries. This amount represented 12 percent of Serbia’s GDP. This report provides an overview of remittance flows from Germany to Serbia and analyzes why a large part of remittance transfers take place outside financial institutions. The study presents a series of recommendations on needed policy changes to facilitate the transfer of remittance flows from the informal channels to licensed or registered financial institutions, thereby maximizing the developmental impact of remittances, reducing remittances fees, improving data collection practices, and strengthening the regulation and supervision of themoney transfer industry.

The ultimate goal of central banks, worldwide, is to promote the foundations for sustainable economic growth. In the case of developing economies, in particular, such objective requires time, huge efforts, attention, and plenty of resources in order to be accomplished to the fullest degree. This paper thoroughly investigates key factors affecting Balkan countries' economic development (as measured by gross domestic product (GDP) growth), focusing especially on the impact of remittances. The analysis was done over an 18-year time interval (2000-2017) and builds on 144 observations. The data figures were retrieved from the World Bank database while two dummies were created to test the impact of the last financial crisis (2008-2012). Econometric tools were employed to carry out a broad analysis on the interdependencies that exist and, in particular, to determine the role of remittance income on growth. The vector auto regressive model was estimated using EViews software, and was used to come up with relevant insights. Empirical findings suggest the following: population growth, remittances, and labor force participation are insignificant factors for sustainable growth. On the other hand, previous levels of GDP, trade, and foreign direct investments (FDIs) appear to be relevant for the predictor. This research provides up-to-date conclusions, which can be considered during the decision-making process of central banks, as well as by government policymakers.

PurposeThe purpose of this study is to explore the impact of cost transparency introduced by the Remittance Prices Worldwide (RPW) online transaction cost comparison tool on remittance inflows of remittance recipient countries in emerging economies.Design/methodology/approachPanel fixed-effect model was employed to test the hypothesis focussing on the period five years before and five years after the adoption of the RPW tool. Macroeconomic determinants of international remittances were also included in the model, and the study focused on 115 emerging economies.FindingsThe econometric results reveal that financial development, gross domestic product (GDP) and inflation encourage remittance inflows, whereas interest rate and age dependency ratio discourage remittances. Political stability and migrant stock seem not to influence remittances flowing into emerging markets.Originality/valueEmpirical evidence corroborates the hypothesis that an increase in cost transparency boosts remittance flows. The findings suggest cost transparency is another lever for policymakers to target in boosting remittance flows.