Leonida Correia

Are remittances an instrument of stabilization and funding in the euro area

ABSTRACT In this study, we explore the specific question of the counter cyclicality of remittances in the euro area, namely, if they could be used to stabilize the business cycle and as an additional source of external financing. This research uses data for 13 euro area countries in the period 2004–2013. For whole of the sample, our two hypotheses concerning stabilization and external financing are rejected, but Lithuania and Greece are outliers. Remittances seem to have had a macroeconomic stabilizing effect on Lithuania and to have mitigated in part the liquidity problems that Greece has faced since the sovereign debt crisis.

Has the sovereign debt crisis changed the cyclicality of Portuguese remittances

ABSTRACT This paper explores the cyclicality of remittances into Portugal from 1996 to 2015. Using bilateral correlations and econometric model regression approaches, we investigate if remittances are countercyclical or procyclical with Portuguese, French and Swiss outputs (France and Switzerland being the two main remitting countries). We also examine the ability of remittances to smooth macroeconomic shocks, and compare their role with other external financial sources. The empirical results suggest that the sovereign debt crisis has changed the cyclicality of remittances from procyclical in relation to Portuguese GDP in the years before the crisis to countercyclical during the crisis period. This conclusion is valid regardless of the economic situation of home and host countries and is robust to the use of different statistical information to measure the business cycle of Portugal (GDP, private consumption, or unemployment rate). Thus, we conclude that remittances received by Portuguese households played an economic stabilization role in the crisis years.