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Economic volatility and remittances: evidence from SIDS

Economic volatility and remittances: evidence from SIDS Purpose – The purpose of this paper is to investigate the potential link between remittances and economic volatility in small island developing states. Design/methodology/approach – The paper estimates a panel data model using a database containing 20 small island developing states (SIDS) observed over annual intervals between 1986 and 2005. Findings – The results suggest that, in general, remittance flows have a stabilising influence on output and investment volatility. However, given the importance of these flows to SIDS, the volatility of remittances also has a significant and positive impact on both investment and consumption volatility. Practical implications – The policy implications of the study's findings is that SIDS (similar to how oil‐producing nations take oil price fluctuations into account when considering policy changes) may have to monitor and forecast future remittance flows and take these projections into account when making changes to either their monetary or fiscal policy stance. Originality/value – Workers' remittances have grown dramatically worldwide, particularly in SIDS, where they constitute one of the main sources of foreign exchange. Given the importance of these flows to economic growth and development in these countries, this study examines the potential link between remittances and economic volatility. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economic Studies Emerald Publishing

Economic volatility and remittances: evidence from SIDS

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References (25)

Publisher
Emerald Publishing
Copyright
Copyright © 2009 Emerald Group Publishing Limited. All rights reserved.
ISSN
0144-3585
DOI
10.1108/01443580910955024
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to investigate the potential link between remittances and economic volatility in small island developing states. Design/methodology/approach – The paper estimates a panel data model using a database containing 20 small island developing states (SIDS) observed over annual intervals between 1986 and 2005. Findings – The results suggest that, in general, remittance flows have a stabilising influence on output and investment volatility. However, given the importance of these flows to SIDS, the volatility of remittances also has a significant and positive impact on both investment and consumption volatility. Practical implications – The policy implications of the study's findings is that SIDS (similar to how oil‐producing nations take oil price fluctuations into account when considering policy changes) may have to monitor and forecast future remittance flows and take these projections into account when making changes to either their monetary or fiscal policy stance. Originality/value – Workers' remittances have grown dramatically worldwide, particularly in SIDS, where they constitute one of the main sources of foreign exchange. Given the importance of these flows to economic growth and development in these countries, this study examines the potential link between remittances and economic volatility.

Journal

Journal of Economic StudiesEmerald Publishing

Published: May 15, 2009

Keywords: Economic change; Economic conditions; Flow of funds

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