Economic volatility and remittances: evidence from SIDS
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.
Keywords
Citation
Jackman, M., Craigwell, R. and Moore, W. (2009), "Economic volatility and remittances: evidence from SIDS", Journal of Economic Studies, Vol. 36 No. 2, pp. 135-146. https://doi.org/10.1108/01443580910955024
Publisher
:Emerald Group Publishing Limited
Copyright © 2009, Emerald Group Publishing Limited