How do remittances react to business cycle in receiving countries? Evidence from transition countries
How do remittances react to business cycle in receiving countries? Evidence from transition countries

Author(s): Cristina Procházková Ilinitchi, David Procházka
Subject(s): National Economy, Business Economy / Management, Economic history, Economic development, Transformation Period (1990 - 2010), Present Times (2010 - today)
Published by: Masarykova univerzita nakladatelství
Keywords: Remittances; Economic cycle; Migration; Transition countries;
Summary/Abstract: There are two main views on remittances. The first one implies that remittances increase dependency of receiving countries and distort economic development, serving as a transfer mechanism for business cycles. The second view claims that remittances serve as an important mechanism for internal development through various channels and that on the contrary remittances reduce volatility of economic growth in receiving countries due to their stability and size. The paper assesses the association of remittances with the aggregate output in receiving countries. The analysis consists of 11 transition countries over the period 1993-2015. The findings reveal that remittances towards transition countries seem to be rather procyclical as in 4 countries there is a downturn in remittances when GDP decreases and vice-versa. Only in one country remittances are found to be countercyclical. For the remaining 6 countries, no pattern of cyclicality is found, the character of remittances being assessed as acyclical. The paper discusses possible explanations for these findings.

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