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Heterogeneity in the long-run remittance-output relationship: Theory and new evidence

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  • Francois, John Nana
  • Ahmad, Nazneen
  • Keinsley, Andrew
  • Nti-Addae, Akwasi

Abstract

The existing literature focuses extensively on the macroeconomic impact of remittances. Yet, the plausible heterogeneity in the remittance-output relationship is understudied. Different country characteristics and mediating factors of remittances suggest that the remittance-output relationship may vary across countries. Uncovering this cross-country heterogeneity can help tailor country-specific policies in managing the aggregate effects of remittances. We use panel data for 80 developing countries over 1970–2014 to systematically study the heterogeneous long-run remittance-output relationship. We find that an increase in remittances is associated with a marginal increase in long-run output on average. This, however, conceals a large cross-country heterogeneity, which uncovers that the impact of remittances on output varies from 0.59% in Dominican Republic to −0.53% in Bosnia and Herzegovina. Differences in the size/sign of the impact of remittances on consumption and investment across countries explain this variation. This cautions against a one-size-fits-all argument for the aggregate impact of remittances.

Suggested Citation

  • Francois, John Nana & Ahmad, Nazneen & Keinsley, Andrew & Nti-Addae, Akwasi, 2022. "Heterogeneity in the long-run remittance-output relationship: Theory and new evidence," Economic Modelling, Elsevier, vol. 110(C).
    • Handle: RePEc:eee:ecmode:v:110:y:2022:i:c:s0264999322000396
    DOI: 10.1016/j.econmod.2022.105793
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    Cited by:

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    More about this item

    Keywords

    Remittances; Output; Heterogeneous panel cointegration; Open-economy; Long-run;
    All these keywords.

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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