Remittances and Vulnerability in Developing Countries

This paper examines how international remittances are affected by structural characteristics, macroeconomic conditions, and adverse shocks in recipient economies. We exploit a novel, rich panel data set, covering bilateral remittances from 103 Italian provinces to seventy-nine developing countries o...

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Bibliographic Details
Published in:The World Bank economic review 2017-02, Vol.31 (1), p.1-23
Main Authors: Bettin, Giulia, Presbitero, Andrea F., Spatafora, Nikola L.
Format: Article
Language:English
Subjects:
ACCESS TO FINANCE
BANKING SYSTEM
BANKS
BUSINESS CYCLES
CAPITAL FLOWS
COMMODITY PRICES
DEBT
DOMESTIC CREDIT
EXCHANGE RATES
FINANCIAL SERVICES
REMITTANCES
SHOCKS
VULNERABILITY
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Summary:This paper examines how international remittances are affected by structural characteristics, macroeconomic conditions, and adverse shocks in recipient economies. We exploit a novel, rich panel data set, covering bilateral remittances from 103 Italian provinces to seventy-nine developing countries over the period 2005–2011. We find that remittances are negatively correlated with the business cycle in recipient countries and in particular increase in response to adverse exogenous shocks, such as large terms-of-trade declines. This effect is stronger where the migrant communities have a larger share of newly arrived migrants. Finally, we show that recipient-country financial development is negatively associated with remittances, suggesting that remittances help alleviate credit constraints.
ISSN:0258-6770
1564-698X
1564-698X
DOI:10.1093/wber/lhv053