Macroeconomic Determinants of International Remittances: Evidence from Time-Series and Panel Methods

Abstract

At more than three times official development aid flows, remittances are now recognized as a key source of scarce foreign exchange for the developing world. Most papers looking into the macroeconomic determinants of remittance inflows tend to be panel, cross-sectional, or qualitative country-specific studies, understandably due a lack of consistent time-series data. We estimate an econometric model using the bounds-testing approach to cointegration and error-correction modeling (Pesaran et al., 2001) on time-series data as well as by employing traditional panel methods on the same data set. It appears that the generalized evidence based on panel or cross-sectional studies may not apply to individual countries.