Migrants Remittances Influence on Fiscal Sustainability in Dependent Economies
Author:Liliana Simionescu and Dalina Dumitrescu
JEL:F24, F21, H7, E62, E52
DOI:
Keywords:migrants’ remittances, consumption, investment, government tax revenue, fiscal
policy, monetary policy.
Abstract:
Migrants’ remittances are an important financial flow to their country of origin. Remittances
sent by migrants reduce the level and severity of poverty in developing countries.
Householders use this money received from migrants for their private consumption and their
investments. This paper aims to analyse the impact of remittances on economic growth,
private consumption, private investments and the government tax revenue in low and upper
middle-income countries. The paper highlights one of the important migration’s drivers,
respectively economic reasons. Our findings are based on data from 74 developing countries
collected for the period between 1989 and 2015. Using a panel data set , our results show that
migrants’ remittances are positively related with economic growth and private consumption
expenditure. Moreover, the results also indicate that variables such as age dependency ratio
and the number of individuals holding an account at a financial institution are statistically
significant in models having GDP per capita and private consumption as dependent variables.
Furthermore, our results show that migrants’ remittances are associated with government tax
revenue and real interest rate when instrumental variables were used.