The effect of economic uncertainty on remittance flows from developed countries

Abstract

This article investigates the effect of economic uncertainty on remittances sent by migrants residing in developed countries to their home countries. The analysis builds on the economic uncertainty index developed by Ahir et al. that reflects the uncertainty related to economic and political events, regarding both near-term and long-term concerns. Economic uncertainty has deleterious effects on remittance outflows from developed countries, especially when uncertainty reaches high levels. Developing countries would therefore suffer from reduced remittance inflows if the current fragmentation of the world were to become protracted, resulting in higher barriers to the movement of capital and people.