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International worker remittances and economic growth in a Real Business Cycle framework

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  • Batu, Michael

Abstract

In this article I augment the standard open economy Real Business Cycle (RBC) model with stochastic remittance shocks. The model was calibrated to match broad, stylized facts common across a large set of remittance recipient countries. The calibration exercise reveals that output does not respond as much to remittance shocks relative to technology shocks. The model predicts that temporary inflows of worker remittances positively affect GDP per capita while a permanent increase of remittances does not. Cross country econometric evidence is consistent with the theory: there is a significant and positive correlation between the temporary component of remittances and growth; and permanent component of remittances do not affect output growth.

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  • Batu, Michael, 2017. "International worker remittances and economic growth in a Real Business Cycle framework," Structural Change and Economic Dynamics, Elsevier, vol. 40(C), pages 81-91.
    • Handle: RePEc:eee:streco:v:40:y:2017:i:c:p:81-91
    DOI: 10.1016/j.strueco.2016.12.004
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    2. Olatunji Abdul Shobande & Oladimeji Tomiwa Shodipe, 2019. "Remittances and Real Exchange Rate: Latest Evidence from Cochrane Orcutt Econometric Model," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 5(2), pages 166-172, June.
    3. Jahan Abdul Raheem & Gazi M. Hassan & Mark J. Holmes, 2021. "The Impact of Remittances on Monetary Transmission Mechanisms during the Pre and Post-Conflict Eras in Sri Lanka," Working Papers in Economics 21/10, University of Waikato.
    4. Henri Njangang & Edmond Noubissi & Hilaire Nkengfack, 2018. "Do remittances increase the size of the informal economy in Sub-saharan African countries?," Economics Bulletin, AccessEcon, vol. 38(4), pages 1997-2007.
    5. Ajisafe Rufus Adebayo & Okunade Solomon Oluwaseun, 2020. "International Capital Inflow and Sub-Saharan African Economy: Does Capital Inflow Lead Growth?," Growth, Asian Online Journal Publishing Group, vol. 7(1), pages 26-34.
    6. Florencia Amábile & Rómulo A. Chumacero, 2023. "Should I stay or should I go?: the economic incentives of intergenerational taxes and transfers in Uruguay," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(2), pages 493-524, April.

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    More about this item

    Keywords

    F24; O11; E32; Remittances; Business cycles; Economic growth;
    All these keywords.

    JEL classification:

    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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