IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/101442.html
   My bibliography  Save this paper

Stress-testing a shock to remittances in a post-Covid world – what impact on liquidity?

Author

Listed:
  • Monahov, Alexandru

Abstract

Remittances have historically been a stable source of funding which has played a key role in the development efforts of many nations worldwide. As a consequence of the Covid crisis and the lockdown measures imposed to counteract the spread of the disease, the World Bank estimated a drop of 20% in remittances by the end of 2020. To study the effect that such a conjuncture would have on the financial stability of developing economies, this paper develops a remittance stress test that investigates the impact of the projected shock on banking sector liquidity at a country level. The study encompasses 112 countries and finds that small, emerging economies with underdeveloped financial sectors suffer the most, with six of the ten most affected nations experiencing a drop in their liquid asset ratios that would place their banking sector at significant liquidity risk.

Suggested Citation

  • Monahov, Alexandru, 2020. "Stress-testing a shock to remittances in a post-Covid world – what impact on liquidity?," MPRA Paper 101442, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:101442
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/101442/1/MPRA_paper_101442.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. World Bank, 2020. "COVID-19 Crisis Through a Migration Lens," World Bank Publications - Reports 33634, The World Bank Group.
    2. Barajas, Adolfo & Chami, Ralph & Ebeke, Christian & Oeking, Anne, 2018. "What's different about monetary policy transmission in remittance-dependent countries?," Journal of Development Economics, Elsevier, vol. 134(C), pages 272-288.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dorina Clichici, 2022. "The Russian Banking System during the Covid-19 Crisis and the Central Bank’s Stabilisation Measures," Global Economic Observer, "Nicolae Titulescu" University of Bucharest, Faculty of Economic Sciences;Institute for World Economy of the Romanian Academy, vol. 10(2), pages 18-26, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hannes Warnecke-Berger, 2022. "The financialization of remittances and the individualization of development: A new power geometry of global development," Environment and Planning A, , vol. 54(4), pages 702-721, June.
    2. Abuka, Charles & Alinda, Ronnie K. & Minoiu, Camelia & Peydró, José-Luis & Presbitero, Andrea F., 2019. "Monetary policy and bank lending in developing countries: Loan applications, rates, and real effects," Journal of Development Economics, Elsevier, vol. 139(C), pages 185-202.
    3. Mr. Luis Brandão-Marques & Mr. Gaston Gelos & Mr. Thomas Harjes & Ms. Ratna Sahay & Yi Xue, 2020. "Monetary Policy Transmission in Emerging Markets and Developing Economies," IMF Working Papers 2020/035, International Monetary Fund.
    4. Rahel Kunz & Brenda Ramírez, 2022. "‘Cambiando el chip’: The gendered constellation of subjectivities of the financialisation of remittances in Mexico," Environment and Planning A, , vol. 54(4), pages 779-799, June.
    5. Fromentin, Vincent & Leon, Florian, 2019. "Remittances and credit in developed and developing countries: A dynamic panel analysis," Research in International Business and Finance, Elsevier, vol. 48(C), pages 310-320.
    6. Lee, Jean N. & Mahmud, Mahreen & Morduch, Jonathan & Ravindran, Saravana & Shonchoy, Abu S., 2021. "Migration, externalities, and the diffusion of COVID-19 in South Asia☆," Journal of Public Economics, Elsevier, vol. 193(C).
    7. Egger, Dennis & Miguel, Edward & Warren, Shana S. & Shenoy, Ashish & Collins, Elliott & Karlan, Dean & Parkerson, Doug & Mobarak, A. Mushfiq & Fink, Günther & Udry, Christopher & Walker, Michael & Hau, 2021. "Falling living standards during the COVID-19 crisis: Quantitative evidence from nine developing countries," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 7(6), pages 1-1.
    8. Immaculate Machasio & Peter Tillmann, 2016. "Remittance Infl ows and State-Dependent Monetary Policy Transmission in Developing Countries," MAGKS Papers on Economics 201638, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    9. Agradi, Mawunyo, 2023. "Does remittance inflow influence energy poverty?," Applied Energy, Elsevier, vol. 335(C).
    10. Marina POPA & Cristina TOMȘA, 2021. "The impact of the COVID-19 pandemic on migration flows and remittances: effects and consequences," CSIE Working Papers, Center for Studies in European Integration (CSEI), Academy of Economic Studies of Moldova (ASEM), issue 17, pages 14-25, June.
    11. Robert Fatton, 2021. "The Paradoxes of the Pandemic and World Inequalities," Social Sciences, MDPI, vol. 10(9), pages 1-22, September.
    12. Nakamura, Nobuyuki & Suzuki, Aya, 2021. "COVID-19 and the intentions to migrate from developing countries: Evidence from online search activities in Southeast Asia," Journal of Asian Economics, Elsevier, vol. 76(C).
    13. Natalia Maslii & Maryna Demianchuk & Igor Britchenko & Maksym Bezpartochnyi, 2022. "Modeling Migration Changes According To Alternative Scenarios in the Context of the Global COVID-19 Pandemic: The Example of Ukraine," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 58-71.
    14. Aleksandr V. Gevorkyan, 2022. "Diaspora and Economic Development: A Systemic View," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 34(3), pages 1522-1541, June.
    15. Segun Subair Awode & Emeka Okoro Akpa & Andy Titus Okwu, 2021. "The effect of remittance and volatility in remittances on macroeconomic performance in Africa: any lessons for COVID-19?," SN Business & Economics, Springer, vol. 1(10), pages 1-15, October.
    16. Nakamura, Nobuyuki & Suzuki, Aya, 2022. "How Altruism Works during a Pandemic: Examining the Roles of Financial Support and Degrees of Individual Altruism on International Remittance," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322073, Agricultural and Applied Economics Association.
    17. Mohammed A. M. Usman & Huseyin Ozdeser & Behiye Çavuşoğlu & Umar Shuaibu Aliyu, 2022. "On the Sustainable Economic Growth in Sub-Saharan Africa: Do Remittances, Human Capital Flight, and Brain Drain Matter?," Sustainability, MDPI, vol. 14(4), pages 1-20, February.
    18. Egami, Hiroyuki & Mano, Yukichi & Matsumoto, Tomoya, 2021. "Mobile money and shock-coping: Urban migrants and rural families in Bangladesh under the COVID-19 shock," Discussion paper series HIAS-E-109, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    19. Pamela Efua Ofori & Daryna Grechyna & Muhammad Shafiullah, 2021. "Remittances, natural resource rent and economic growth in Sub-Saharan Africa," Cogent Economics & Finance, Taylor & Francis Journals, vol. 9(1), pages 1979305-197, January.
    20. Arjan Haan, 2020. "Labour Migrants During the Pandemic: A Comparative Perspective," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 63(4), pages 885-900, December.

    More about this item

    Keywords

    remittances; stress test; liquidity risk; financial development; banking sector;
    All these keywords.

    JEL classification:

    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:101442. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.