Remittances, Remittance Concentration, and Volatility: Is Africa Different from the Middle East?

Abstract

This paper makes a new contribution to the empirical literature on the macroeconomic consequences of remittances using data over 1970-2015 period for 56 African and Middle Eastern countries to study the impact of (i) large remittance inflows and (ii) high concentration of origin of remittance on the volatilities of real GDP growth, exports-to-GDP ratio, nominal exports growth and nominal exchange rate depreciation. We find that (i) large remittances can reduce all types of volatility, especially in African countries, and (ii) high remittance concentration, by itself, has been associated with higher volatilities in African but not Middle Eastern countries, and that having both high remittances, but also high concentration aggravates all types of volatility in both regions, although results for the Middle East are not always conclusive.