An Empirical Study of the Determinants of Remittances in Transitional Economies
Keywords:
Remittances; Transitional Economies; Panel DataAbstract
The paper investigated the determinants of remittances in transitional economies using panel
data (1997 – 2014) with econometric estimation techniques such as fixed effects, random effects and
the pooled OLS. The study found out that FDI and economic growth had a significant negative influence
on remittances across all the three econometric estimation methods. Financial development and savings
had a significant positive effect on remittances under the fixed and random effects and a significant
negative impact on remittances under the pooled OLS approach. Another variable that was also found
to have had a significant positive impact on remittances under both the fixed and random effects is
inflation, consistent with available theoretical underpinnings. In summary, variables that were found to
have a significant influence on remittances include FDI, economic growth, inflation, financial
development and savings. Across all the three econometric estimation methods, human capital
development and trade openness were found not to have any significant influence on remittances, a
finding which contradicts available theoretical and empirical literature.
References
Abbas, S. & Mohammad, S. D. (2016). International migration and remittance flow to Pakistan: A panel
data analysis. Pakistan Journal of Social Science (PJSS), 36 (2), pp. 1035-1044
Adenutsi, D. E. (2014). Macroeconomic determinants of workers remittances and compensation of
employees in Sub Sahara Africa. The Journal of Developing Areas 48 (1) pp. 337-360
Ahmed, J. & Martinez-Zarzoso, I. (2016). Do transfer costs matter for foreign remittances? A gravity
model approach. Economics: The Open-Access, Open Assessment E-Journal, 10 (2016-4), pp. 1-36.
Doi.org/10.5018/economics-journal.ja.
Akçay S. (2018). Remittance and misery index in Turkey: is there a link? Applied Economics Letters,
25 (13), pp. 895-899. Doi.org/10.1080/13504851.
Al-Assaf, G. & Al-Malki, A. M. (2014). Modelling the macroeconomic determinants of workers
remittances: the case of Jordan. International Journal of economics and Financial Issues 4(3), pp. 514-
526.
Apergis N. & Cooray, A. (2018), Asymmetric real exchange rates and poverty: The role of remittances.
Emerging Markets Review, 35 (2018), pp. 111-119.
Arezki, R. & Brűckner, M. (2011). Rainfall, financial development and remittances: evidence from
Sub-Sahara Africa. Working paper N0. WP/11/153. Washington, DC: International Monetary Fund
(IMF).
Arun, T. & Ulku, H. (2011). Determinants of remittances: the case of South Asian community in
Manchester. Journal of Development Studies, 47 (6); pp. 894-912.
Baldé, Y. (2011). The Impact of Remittances and Foreign Aid on Savings/Investment in Sub-Saharan
Africa. African Development Review, 23 (2), pp. 247-262.
Balli, F. & Rana, F. (2015). Determinants of risk sharing through remittances. Journal of Banking and
Finance 55, pp. 107-116.
Bashier, A. (2018). The impact of remittances on the import demand function in Jordan: ARDL bounds
Testing approach. European Scientific Journal 14 (10), pp. 304-319.
Doi:10.19044/esj.2018.v14n10p304.
Beine, M.; Lodigiani, E. & Vermeulen, R. (2012). Remittances and financial openness. Regional
Science and Urban Economics, 42; (2012), pp. 844-857.
Bettin, G. & Zazzaro, A. (2018). The impact of natural disasters on remittances to low and middle
income countries. The Journal of Development Studies, 54 (3), pp. 481-500.
Doi.org/10.1080/00220388.2017.1303672.
Bhattacharya, M.; Inekwe, J. & Paramati, S. R. (2018). Remittances and financial development:
empirical evidence from heterogeneous panel of countries. Applied Economics.
Doi.org/10.1080/00036846.2018.1441513.
Bredtman, J.; Flores, F. M. & Ottens, S. (2018). Remittances and the Brain drain: Evidence from
Microdata for Sub-Saharan Africa. The Journal of Development Studies (2018).
Doi:10.1080/00220388.2018.1443208.
Carling J & Hoelscher K (2013). The capacity and desire to remit: comparing local and transnational
influences. Journal of Ethnic and Migration Studies, 39 (6), pp. 939- 958.
Doi:10.1080/1369183x.2013.765657.
Cismas, L. M. Curea-Pitorac, R. and Vadasan, L. (2019). The impact of remittances on the receiving
country: Some evidence from Romania in European context. Economic Research. Doi:
10.1080/1331677X.2019.1629328.
Comes, C. A.; Bunduchi, E.; Vasile, V. & Stefan, D. (2018). The impact of foreign direct investments
and remittances on Economic Growth: A case study in Central Eastern Europe. Sustainability (2018),
10, p. 238. Doi: 10/3390/su10010238
Coon, M. & Neumann, R. (2015). Follow the money: Remittance responses to FDI inflows. Munich
Personal REPEC Archive (MPRA).
Driffield, N & Jones, C. (2013). Impact of FDI, ODA and Migrant Remittances on Economic Growth
in Developing Countries: A systems Approach, The European Journal of Development Research, 25
(2); pp. 173-196.
Ecer, S. & Tompkins, A. (2013). An econometric analysis of the remittance determinants among
Ghanaians and Nigerians in the United States, United Kingdom and Germany. International Migration
51(S1). Doi 10.111/j.1468-2435.2010.00604x.
Ezeoha AE (2013). Financial determinants of international remittance flows to the Sub Sahara African
Region. International Migration 51 (S1). Doi. 10.111/imig.12061
Fonchamnyo DC. (2012). The altruistic motive of remittances: a panel of data analysis of economies in
Sub Sahara Africa. International Journal of Economics and Finance, 4(10), pp. 192-200. Doi.
10.5539/ijef.v4n10p192
Goschini, Z.; Roman, M. & Popa; A. (2011). Determinants of Romanian international Migrants
Remittances, 51st Congress of the European Regional Science Association: New Challenges for
European Regions and Urban Areas in a Globalised World 30 August-3 September 2011 Barcelona,
Spain, European Regional Science Association (ERSA), Louvain-la-Neuve.
Goza, F. & Ryabov, I. (2012). Remittance activity among Brazillians in the US and Canada.
International Migration 50 (4). Doi.10.1111/j.1468-2435.2009.00590x.
Guetat, I. & Sridi, D. (2017). Institutional quality effect on remittances in MENA region. Middle East
Development Journal, 9 (1), pp. 84-100. Doi:10.1080/17938120.2017.1288474.
Haller, A. P.; Butnaru, R. C. & Butnaru, C. I. (2018). International Migration Remittances in the context
of Economic and Social Sustainable Development. A comparative study of Romania-Bulgaria.
Sustainability 10, p. 1156. Doi: 10.3390/su10041156.
International Monetary Fund (IMF, 2005). World Economic Outlook 2005. Washington.
Islam M S & Nasrin S. (2015) Driving forces of remittance inflow in Bangladesh: An empirical study.
International Journal of Economics and Finance 7 (6); pp. 126-138. Doi.10.5539/ijef.v7n6p126.
Izabela, S. & Sobiech, I. (2019). Remittances, finance and growth: Does financial development foster
the impact of remittances on economic growth? World Development, 113 (C); pp. 44-59.
Kangmennaang, J.; Bezner-Kerr, R. & Luginaah. (2018). Impact of migration and remittances on
household welfare among rural households in Northern and Central Malawi. Migration and
Development 7 (1), pp. 55-71. Doi: 10.1080/2163234.2017.1325551.
Koczan, Z. (2016). Remittance during crises. Economics of Transition, 24 (3), pp. 507-533.
Doi:10.1111/ecot.12099.
Kumar, R. R; Stauvermann, P. J.; Kumar, N. N. & Shahzad, S. J. H. (2018). Revisiting the threshold
effect of remittances on total factor productivity growth in South Asia: A study of Bangladesh and
India. Applied Economics 50 (26), pp. 2860-2877. Doi:10.1080/00036846.2017.1412074.
Kumar, R. R.; Stauvermann, P. J.; Patel, A. & Prasad, S. (2018). The effect of remittances on economic
growth in Kyrgyzstan and Macedonia: Accounting for financial development. International Migration,
56 (1), pp. 95-126.
Mahapatro, S. R. (2017). Why do they remit? Examining factors influencing migrant remittances in
India. Journal of Development Policy and Practice 2(2); pp. 225-235. Doi.10.1177/24.
McCraken, S.; Ramlogan-Dobson, C.; & Stack, M. M. (2017). A gravity model of remittance: evidence
from Latin America and the Caribbean. Regional Studies 51 (5), pp. 737-749.
Doi.org/10.1080/00343404.
Meyer, D. & Shera, A. (2017). The impact of remittances on economic growth: An econometric model.
EconomiA, 18 (2), pp. 147-155.
Narayan, P.K.; Narayan, S. & Mishra, S. (2011). Do Remittances Induce Inflation? Fresh Evidence
from Developing Countries. Southern Economic Journal, 77 (4); pp. 914-933.
Nathan, M. (2014). Microeconomic determinants of migrant remittances into Zimbabwe: a survey of
Zimbabweans in Botswana and South Africa. International Journal of Economics, Commerce and
Management, 11 (9), pp. 1-15.
Ngoma, A. L.; Ismail, N. W. & Law, S. H. (2018). Domestic macroeconomic conditions and inflow of
workers’ remittance in labour-sending Asian countries. International Journal of Business Society, 19
(1), pp. 41-58.
Nisar, A. & Tufail, S. (2013). An analysis of relationship between remittances and inflation in Pakistan.
Zagreb International Review of Economics & Business, 16 (2), pp. 19-38.
Osemenshan, A. F. (2019). Remittance and economic growth nexus in Nigeria: Does financial sector
development play a critical role? International Journal of Management, Economics and Social
Sciences, 8 (2); pp. 116-135.
Panda, P. D. & Trivedi, P. (2015). Macroeconomic determinants of remittances: A cross-country
analysis. Journal of International Economics, 6 (2), pp. 83-100.
Sultonov, M. (2013). The macroeconomic determinants of remittance flows from Russia to Tajikistan,
Transit Stud Rev, 19, pp. 417-430. Doi.10.1007/s11300-013-0257-5.
Ulku, H. (2012). Remitting behaviour of Turkish migrants: evidence from household data in Germany.
Urban studies, 49 (14), pp. 3130-3158.
Yuni, D. N.; Omeje, A. N. & Asogwa, H. T. (2013). Determinants of remittance: Panel evidence form
selected countries in Africa. Journal of Economics and Sustainable Development, 4 (20), pp. 52-57.
data analysis. Pakistan Journal of Social Science (PJSS), 36 (2), pp. 1035-1044
Adenutsi, D. E. (2014). Macroeconomic determinants of workers remittances and compensation of
employees in Sub Sahara Africa. The Journal of Developing Areas 48 (1) pp. 337-360
Ahmed, J. & Martinez-Zarzoso, I. (2016). Do transfer costs matter for foreign remittances? A gravity
model approach. Economics: The Open-Access, Open Assessment E-Journal, 10 (2016-4), pp. 1-36.
Doi.org/10.5018/economics-journal.ja.
Akçay S. (2018). Remittance and misery index in Turkey: is there a link? Applied Economics Letters,
25 (13), pp. 895-899. Doi.org/10.1080/13504851.
Al-Assaf, G. & Al-Malki, A. M. (2014). Modelling the macroeconomic determinants of workers
remittances: the case of Jordan. International Journal of economics and Financial Issues 4(3), pp. 514-
526.
Apergis N. & Cooray, A. (2018), Asymmetric real exchange rates and poverty: The role of remittances.
Emerging Markets Review, 35 (2018), pp. 111-119.
Arezki, R. & Brűckner, M. (2011). Rainfall, financial development and remittances: evidence from
Sub-Sahara Africa. Working paper N0. WP/11/153. Washington, DC: International Monetary Fund
(IMF).
Arun, T. & Ulku, H. (2011). Determinants of remittances: the case of South Asian community in
Manchester. Journal of Development Studies, 47 (6); pp. 894-912.
Baldé, Y. (2011). The Impact of Remittances and Foreign Aid on Savings/Investment in Sub-Saharan
Africa. African Development Review, 23 (2), pp. 247-262.
Balli, F. & Rana, F. (2015). Determinants of risk sharing through remittances. Journal of Banking and
Finance 55, pp. 107-116.
Bashier, A. (2018). The impact of remittances on the import demand function in Jordan: ARDL bounds
Testing approach. European Scientific Journal 14 (10), pp. 304-319.
Doi:10.19044/esj.2018.v14n10p304.
Beine, M.; Lodigiani, E. & Vermeulen, R. (2012). Remittances and financial openness. Regional
Science and Urban Economics, 42; (2012), pp. 844-857.
Bettin, G. & Zazzaro, A. (2018). The impact of natural disasters on remittances to low and middle
income countries. The Journal of Development Studies, 54 (3), pp. 481-500.
Doi.org/10.1080/00220388.2017.1303672.
Bhattacharya, M.; Inekwe, J. & Paramati, S. R. (2018). Remittances and financial development:
empirical evidence from heterogeneous panel of countries. Applied Economics.
Doi.org/10.1080/00036846.2018.1441513.
Bredtman, J.; Flores, F. M. & Ottens, S. (2018). Remittances and the Brain drain: Evidence from
Microdata for Sub-Saharan Africa. The Journal of Development Studies (2018).
Doi:10.1080/00220388.2018.1443208.
Carling J & Hoelscher K (2013). The capacity and desire to remit: comparing local and transnational
influences. Journal of Ethnic and Migration Studies, 39 (6), pp. 939- 958.
Doi:10.1080/1369183x.2013.765657.
Cismas, L. M. Curea-Pitorac, R. and Vadasan, L. (2019). The impact of remittances on the receiving
country: Some evidence from Romania in European context. Economic Research. Doi:
10.1080/1331677X.2019.1629328.
Comes, C. A.; Bunduchi, E.; Vasile, V. & Stefan, D. (2018). The impact of foreign direct investments
and remittances on Economic Growth: A case study in Central Eastern Europe. Sustainability (2018),
10, p. 238. Doi: 10/3390/su10010238
Coon, M. & Neumann, R. (2015). Follow the money: Remittance responses to FDI inflows. Munich
Personal REPEC Archive (MPRA).
Driffield, N & Jones, C. (2013). Impact of FDI, ODA and Migrant Remittances on Economic Growth
in Developing Countries: A systems Approach, The European Journal of Development Research, 25
(2); pp. 173-196.
Ecer, S. & Tompkins, A. (2013). An econometric analysis of the remittance determinants among
Ghanaians and Nigerians in the United States, United Kingdom and Germany. International Migration
51(S1). Doi 10.111/j.1468-2435.2010.00604x.
Ezeoha AE (2013). Financial determinants of international remittance flows to the Sub Sahara African
Region. International Migration 51 (S1). Doi. 10.111/imig.12061
Fonchamnyo DC. (2012). The altruistic motive of remittances: a panel of data analysis of economies in
Sub Sahara Africa. International Journal of Economics and Finance, 4(10), pp. 192-200. Doi.
10.5539/ijef.v4n10p192
Goschini, Z.; Roman, M. & Popa; A. (2011). Determinants of Romanian international Migrants
Remittances, 51st Congress of the European Regional Science Association: New Challenges for
European Regions and Urban Areas in a Globalised World 30 August-3 September 2011 Barcelona,
Spain, European Regional Science Association (ERSA), Louvain-la-Neuve.
Goza, F. & Ryabov, I. (2012). Remittance activity among Brazillians in the US and Canada.
International Migration 50 (4). Doi.10.1111/j.1468-2435.2009.00590x.
Guetat, I. & Sridi, D. (2017). Institutional quality effect on remittances in MENA region. Middle East
Development Journal, 9 (1), pp. 84-100. Doi:10.1080/17938120.2017.1288474.
Haller, A. P.; Butnaru, R. C. & Butnaru, C. I. (2018). International Migration Remittances in the context
of Economic and Social Sustainable Development. A comparative study of Romania-Bulgaria.
Sustainability 10, p. 1156. Doi: 10.3390/su10041156.
International Monetary Fund (IMF, 2005). World Economic Outlook 2005. Washington.
Islam M S & Nasrin S. (2015) Driving forces of remittance inflow in Bangladesh: An empirical study.
International Journal of Economics and Finance 7 (6); pp. 126-138. Doi.10.5539/ijef.v7n6p126.
Izabela, S. & Sobiech, I. (2019). Remittances, finance and growth: Does financial development foster
the impact of remittances on economic growth? World Development, 113 (C); pp. 44-59.
Kangmennaang, J.; Bezner-Kerr, R. & Luginaah. (2018). Impact of migration and remittances on
household welfare among rural households in Northern and Central Malawi. Migration and
Development 7 (1), pp. 55-71. Doi: 10.1080/2163234.2017.1325551.
Koczan, Z. (2016). Remittance during crises. Economics of Transition, 24 (3), pp. 507-533.
Doi:10.1111/ecot.12099.
Kumar, R. R; Stauvermann, P. J.; Kumar, N. N. & Shahzad, S. J. H. (2018). Revisiting the threshold
effect of remittances on total factor productivity growth in South Asia: A study of Bangladesh and
India. Applied Economics 50 (26), pp. 2860-2877. Doi:10.1080/00036846.2017.1412074.
Kumar, R. R.; Stauvermann, P. J.; Patel, A. & Prasad, S. (2018). The effect of remittances on economic
growth in Kyrgyzstan and Macedonia: Accounting for financial development. International Migration,
56 (1), pp. 95-126.
Mahapatro, S. R. (2017). Why do they remit? Examining factors influencing migrant remittances in
India. Journal of Development Policy and Practice 2(2); pp. 225-235. Doi.10.1177/24.
McCraken, S.; Ramlogan-Dobson, C.; & Stack, M. M. (2017). A gravity model of remittance: evidence
from Latin America and the Caribbean. Regional Studies 51 (5), pp. 737-749.
Doi.org/10.1080/00343404.
Meyer, D. & Shera, A. (2017). The impact of remittances on economic growth: An econometric model.
EconomiA, 18 (2), pp. 147-155.
Narayan, P.K.; Narayan, S. & Mishra, S. (2011). Do Remittances Induce Inflation? Fresh Evidence
from Developing Countries. Southern Economic Journal, 77 (4); pp. 914-933.
Nathan, M. (2014). Microeconomic determinants of migrant remittances into Zimbabwe: a survey of
Zimbabweans in Botswana and South Africa. International Journal of Economics, Commerce and
Management, 11 (9), pp. 1-15.
Ngoma, A. L.; Ismail, N. W. & Law, S. H. (2018). Domestic macroeconomic conditions and inflow of
workers’ remittance in labour-sending Asian countries. International Journal of Business Society, 19
(1), pp. 41-58.
Nisar, A. & Tufail, S. (2013). An analysis of relationship between remittances and inflation in Pakistan.
Zagreb International Review of Economics & Business, 16 (2), pp. 19-38.
Osemenshan, A. F. (2019). Remittance and economic growth nexus in Nigeria: Does financial sector
development play a critical role? International Journal of Management, Economics and Social
Sciences, 8 (2); pp. 116-135.
Panda, P. D. & Trivedi, P. (2015). Macroeconomic determinants of remittances: A cross-country
analysis. Journal of International Economics, 6 (2), pp. 83-100.
Sultonov, M. (2013). The macroeconomic determinants of remittance flows from Russia to Tajikistan,
Transit Stud Rev, 19, pp. 417-430. Doi.10.1007/s11300-013-0257-5.
Ulku, H. (2012). Remitting behaviour of Turkish migrants: evidence from household data in Germany.
Urban studies, 49 (14), pp. 3130-3158.
Yuni, D. N.; Omeje, A. N. & Asogwa, H. T. (2013). Determinants of remittance: Panel evidence form
selected countries in Africa. Journal of Economics and Sustainable Development, 4 (20), pp. 52-57.
Published
2020-07-15
How to Cite
Tsaurai, K. ., & Maseko, C. M. . (2020). An Empirical Study of the Determinants of Remittances in Transitional Economies: Array. Acta Universitatis Danubius. Œconomica, 16(3). Retrieved from https://dj.univ-danubius.ro/index.php/AUDOE/article/view/384
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Financial Economics
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