Junaid Ahmed

Remittances and Business Cycles: Comparison of South Asian Countries

ABSTRACT South Asia is one of the worlds principal remittance-receiving regions. This study examines the home and host business cycles of migrant remittance flows to the region. Employing the Structural Vector Autoregression (SVAR) technique, the remittance behaviour of the regions four main countries is compared. Remittances to India and Pakistan show a mainly acyclical behaviour with respect to the output of the four host regions, and a countercyclical behaviour with respect to home output. In contrast, remittances to the two smaller economies of Bangladesh and Sri Lanka are found to be mainly procyclical. The study shows that the macroeconomic remittance behaviour varies with respect to the importance of remittance flows in the home economy. Moreover, remittance behaviour seems to respond more to home economy specificities than to those of the different regions that host the migrants from the developing countries.

Blessing or curse: The stabilizing role of remittances, foreign aid and FDI to Pakistan

Inflows of remittances to Pakistan are being increasingly viewed as a relatively attractive source of external finance, one that can help to foster development and manage economic shocks. Remittances have become a major source of revenue, surpassing the volume of FDI and official development assistance that the country receives. This study focuses primarily on the stability, cyclicality and stabilization impacts of migrant remittances to Pakistan. It is evident that foreign inflows exhibit different types of volatility; remittances are found to be a less volatile source of external finance than FDI and ODA that are counter-cyclical and stabilizing, thus serving to steady the recipient economy in times of economic downturns. ODA appears to be acyclical and stabilizing, whereas FDI emerges as pro-cyclical and destabilizing. Furthermore, remittances are insensitive to cyclical fluctuation in source countries. We also proceed with SVAR-based identification in order to examine the responses of financial flows to innovation in receiving and source economies. We confirm the counter-cyclical mechanism of remittances with Pakistani output. In particular, our results indicate that remittance flows to Pakistan are mainly due to the economic conditions in the receiving economy.

How Do Migrant Remittances Affect Household Consumption Patterns

This study analyzes differential consumption patterns of Pakistani migrant households resulting from foreign and domestic remittances. Using the Working-Leser model and a number of matching techniques, we analyze a large representative household survey carried out in 2010-2011 to compare various expenditure categories of recipient and non-recipient households across different income brackets. Findings show that foreign remittances lead to significant consumption changes. Contrary to the widely-held view, remittances do not raise the budget share on consumer goods and recreation, while the allocation on education increases substantially. Households receiving domestic remittances also show a strong focus on human capital with significantly higher shares of health and education. Recipients of international transfers living below one dollar a day spend proportionally more on food compared with their non-recipient counterparts, whereas their education and health budget shares are not dissimilar. We find that migrant households perceive remittances as a mainly transient, not fully fungible source of income.