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Determinants of Bilateral Remittance Flows

Author

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  • Lueth Erik

    (International Monetary Fund)

  • Ruiz-Arranz Marta

    (International Monetary Fund)

Abstract

This paper explores the determinants of workers' remittances using a novel dataset of bilateral remittance flows. The paper finds that some of the variables commonly used in gravity equations are very powerful in explaining remittance flows. The evidence on the motives to remit is mixed, but altruism may be less of 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.

Suggested Citation

  • Lueth Erik & Ruiz-Arranz Marta, 2008. "Determinants of Bilateral Remittance Flows," The B.E. Journal of Macroeconomics, De Gruyter, vol. 8(1), pages 1-23, October.
    • Handle: RePEc:bpj:bejmac:v:8:y:2008:i:1:n:26
    DOI: 10.2202/1935-1690.1568
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    References listed on IDEAS

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    Keywords

    bilateral remittance flows; gravity model;

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