Main Article Content

Abstract

This study aims to examine the determinants of workers’ remittances and their impact on economic growth in Yemen. Autoregressive Distributed Lag (ARDL) bounds test to co-integration and error correction model (ECM) were applied on data covering the period from 1990 to 2014. According to the model of remittances determinants, workers’ remittances in Yemen respond to the macroeconomic conditions of both the home and host countries. It is found that, in the long-run, migrant stock and income level at the host countries are positively and strongly influence remittances level, with a feeble impact of domestic inflation rates. The effect of the home country’s income seems to be positive but insignificant in explaining the behavior of remittances level. The model of economic growth suggests that, in the long-run,  the impact of workers’ remittances appears to be positive and moderate with positive and stronger influences observed for financial development and official development assistance. Accordingly, it is recommended that a lesser weight should be given to remittances in the strategic planning process, taking into consideration the increasing potentials of the conditions in the neighboring host countries to be changed. In addition, using remittances as a means of economic growth can be enhanced by encouraging migrants to direct their savings towards productive investment activities, and via formal channels.

Keywords

Remittances Economic Growth Time Series Analysis

Article Details

Author Biographies

Essa A. Alhannom, Faculty of Administrative Sciences, Ibb University (Yemen)

Associate Professor of Economics

Ghaleb S. Mushabeb , Faculty of Administrative Sciences, Ibb University (Yemen)

Associate Professor of Economics

How to Cite
Alhannom, E. A., & Mushabeb , G. S. (2021). Workers’ Remittances in Yemen: Macroeconomic Determinants and Impact on Economic Growth. Management & Economics Research Journal, 3(2), 41-62. https://doi.org/10.48100/merj.2021.157
Cited by

References

  1. Adelman, Irma, & Taylor, J. E. (1990). Is Structural Adjustment with a Human Face Possible? The Case of Mexico. Journal of Development Studies, 26, 387–407.https://doi.org/10.1080/00220389008422161
  2. Adenutsi, Deodat E. (2014). Macroeconomic Determinants of Workers' Remittances and Compensation of Employees in Sub-Saharan Africa. The Journal of Developing Areas, 48(1), 337–360.https://doi.org/10.1353/jda.2014.0015
  3. Agarwal, R., & Horowitz, A. W. (2002). Are international remittances altruism or insurance? Evidence from Guyana using multiple-migrant households. World Development, 30, 2033–2044.https://doi.org/10.1016/s0305-750x(02)00118-3
  4. Amuedo-Dorantes, C., &Pozo, S. (2004). Worker’s Remittances and the Real Exchange Rate: A Paradox of Gifts. World Development, 32, 1407–1417.https://doi.org/10.1016/j.worlddev.2004.02.004
  5. Ayda, O.T., Neyapti, B., Metin-Ozcan, K. (2005). Determinants of Workers Remittances: The Case of Turkey. Emerging Markets Finance and Trade, 41(3), 53–69.https://doi.org/10.1080/1540496x.2005.11052609
  6. Bettin, G., Presbitero, A. F., &Spatafora, N.(2014). Remittances and Vulnerability in Developing Countries (IMF Working Paper NO. WP/14/13).https://doi.org/10.5089/9781484385081.001
  7. Barajas, A., Chami, R., Fullenkamp, C., Gapen, M., and Montiel, P. (2009). Do Workers’ Remittances Promote Economic Growth? (IMF Working Paper NO. WP/153/09).
  8. Begum, M.N., &Sutradhar, R.R. (2012). Behaviour of remittance inflows and its determinants in Bangladesh (Bangladesh Bank Working Paper No. 1202).
  9. Brown, R.L., Durbin, J., & Evans J.M. (1975). Techniques for testing the constancy of regression relations over time. Journal of Royal Statistical Society, Series B,37(2), 149–163.https://doi.org/10.1111/j.2517-6161.1975.tb01532.x
  10. Chami, R., Fullenkamp, C., &Jahjah, S. (2003). Are Immigrant Remittances Flows a Source of Capital for Development? (IMF Working Paper NO.WP 189/03).https://doi.org/10.5089/9781451859638.001
  11. Chami, R., Hakura, D., &Montiel, P. (2009). Remittances: An Automatic Output Stabilizer? (IMF Working Paper NO. WP 91/09).https://doi.org/10.5089/9781451872385.001
  12. Daway-Duacanes, Sarah Lynne. (2015). A note on the effects of remittances and overseas migration on some Philippine statistics. Philippine Review of Economics, 51(1), 95–116.
  13. Dickey, D., & Fuller, W. (1981). Likelihood Ratio Statistics For Autoregressive Time Series With A Unit Root. Econometrica, 49(S), 1057-72.https://doi.org/10.2307/1912517
  14. Edwards C.A., &Ureta, M. (2003). International Migration, Remittances and Schooling : Evidence from El Salvador. Journal of Development Economics, 72(2), 429–461.https://doi.org/10.1016/s0304-3878(03)00115-9
  15. Elbadawi, I. A., & Rocha, R. (1992). Determinants of Expatriate Workers’ Remittances in North Africa and Europe (World Bank Working Paper Series NO. 1038).
  16. El-Sakka, M., &MaNabb, R. (1999). The Macroeconomic Determinants of Migrant Remittances. World Development, 27, 1493–1502.https://doi.org/10.1016/s0305-750x(99)00067-4
  17. ESCWA, (2014). Directing remittances of Yemeni workers abroad and migrants towards development. https://www.unescwa.org/sites/www.unescwa.org/files/page_attachments/y1-1.pdf, 10/10/2020.
  18. Ezeoha, A.E. (2013). Financial determinants of international remittanceflows to the sub-saharan African region. International Migration, 51(s1), e84–e97.https://doi.org/10.1111/imig.12061
  19. Fajnzylber, P., & Lopez, J. H. (2007), Close to Home: The Development Impact of Remittances in Latin America, mimeo (Washington: World Bank).
  20. Freund, C., &Spatafora, N. (2008). Remittances, Transaction Costs, Determinants and Informality. Journal of Development Economics, 86(2), 356–366.https://doi.org/10.1016/j.jdeveco.2007.09.002
  21. Giuliano, P., & Ruiz-Arranz, M. (2009). Remittances,financial development, and growth. Journal of Development Economics, 90, 144–152.https://doi.org/10.1016/j.jdeveco.2008.10.005
  22. Glytsos, N. (1988). Remittances in Temporary Migration: A Theoretical Model and Its Testing with the Greek-German Experience. Review of World Economics, 124, 524–549.https://doi.org/10.1007/bf02708664
  23. Glytsos,N. (1993). Measuring the income effects of migrant remittances: A methodological approach applied to Greece. Economic Development and Cultural Change, 42, 131–168.https://doi.org/10.1086/452068
  24. Glytsos, N.P. (2002). A Model of Remittances Determination Applied to Middle East and North Africa Countries. Centre of Planning and Economic Research 73. https://econwpa.ub.uni-muenchen.de/econ-wp/lab/papers/0505/0505016.doc.gz.
  25. Gupta, P. (2005). Macroeconomic Determinants of Remittances: Evidence from India (IMF Working Paper No.WP 224/05).https://doi.org/10.5089/9781451862430.001
  26. Higgins, M., Hysenbegasi, A., &Pozo, S. (2004). Exchange-rate uncertainty and workers’ remittances. Applied Financial Economics, 14(6), 403–411.https://doi.org/10.1080/09603100410001673630
  27. Hor, C., Pheang, P. (2017). Analysis Determinant Factors Effect on Migrant Workers’ Remittances Flow to the CLMV Countries. International Journal of Economics and Financial Issues,7(2), 202–207.
  28. Katseli, L., &Glytsos, N. (1986). Theoretical and EmpiricalDeterminants of International LabourMobility: A Greek-German Perspective (Centre for Economic Policy Research Working Paper NO. 148).
  29. Kroft, Kory, &Huw, Lloyd-Ellis., (2002). Further Cross—Country Evidence on the link Between Growth, Volatility and Business Cycles. Manuscript for preparation. Retrived from http://qed.econ.queensu.ca/pub/faculty/lloyd-ellis/papers/kory.pdf.
  30. Lartey, E. K., Mandelman, F. S., & Acosta P. A. (2012). Remittances, Exchange RateRegimes and the Dutch Disease: A Panel Data Analysis. Review of International Economics, 20(2), 377–395.https://doi.org/10.1111/j.1467-9396.2012.01028.x
  31. Lianos, T.P. (1997). Factors Determining Migrant Remittances: The Case of Greece. International Migration Review,31(1), 72-87.https://doi.org/10.1177/019791839703100104
  32. Lucas, R., & Stark, O. (1985). Motivations to Remit: Evidence from Botswana. The Journal of Political Economy, 93, 901-918.https://doi.org/10.1086/261341
  33. Lucas, R. E. B. (2005). International Migration and Economic Development. http://www.e-elgar.com/shop/isbn/9781845423834.
  34. Lueth, E., & Ruiz-Arranz, M. (2006). A Gravity Model of Workers’ Remittances (IMF Working Paper NO. WP/290/06).https://doi.org/10.5089/9781451865509.001
  35. McCracken, S., Carlyn, Ramlogan-Dobson, & Stack , Marie M. (2017). A gravity model of remittance determinants: evidence from Latin America and the Caribbean. Regional Studies, 51(5), 737–749. https://doi.org/10.1080/00343404.2015.1133904
  36. Mesnard, A. (2001). Temporary migration and intergenerational mobility. Louvain Economic Review, 67(1), 59–88.
  37. Mim, S., & Ali, Mohamed S. (2012). Through Which Channels Can Remittances Spur Economic Growth in MENA Countries?. International Journal of Economic Perspectives, 6(3), 279–294.https://doi.org/10.2139/ssrn.2006818
  38. Narayan, P.K. (2004). Reformulating critical values for the bounds F-statistics approach to co-integration: an application to the tourism demand model for Fiji (Department of Economics Discussion Papers No. 02/04 Monash University).
  39. Panda, P. D., &Trivedi, P. (2015). Macroeconomic determinants of remittances: A cross-country analysis. Journal of International Economics,6(2), 83–100.
  40. Pesaran, M.H., & Shin, Y. (1996). Co-integration and Speed of Convergence to Equilibrium. Journal of Econometrics, 71(1-2), 117–143.https://doi.org/10.1016/0304-4076(94)01697-6
  41. Pesaran, M.H., Shin, Y., & Smith, R.J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289–326.https://doi.org/10.1002/jae.616
  42. Phillips,P. C., &Perron, P. (1988). Testing For A Unit Root İn Time Series Regression. Biometrika, 75(2), 335–346.https://doi.org/10.1093/biomet/75.2.335
  43. Rabbi, F., Chowdhury, M. B., &Hasan, M. (2013). Macroeconomic impact of remittances and the Dutch Disease in a developing country. American Journal of Economics, 3(5C), 156–60.
  44. Ratha, D. (2013). The Impact of Remittances on Economic Growth and Poverty Reduction. Migration Policy Institute, Washington, D.C. https://www.migrationpolicy.org/pubs/Remittances-PovertyReduction.pdf.
  45. Rempel, H., &Lobdell, R. (1978). The role of Urban to Rural Remittances in rural development. Journal of Development Studies, 14, 324-341.https://doi.org/10.1080/00220387808421678
  46. Singh, R., Haacker, M., Lee, K-W., & Goff, M.L. (2011). Determinants and macroeconomic impact of remittances in Sub-Saharan. Africa Journal of African Economies, 20(2), 312–340. https://doi.org/10.1093/jae/ejq039
  47. Swamy, G. (1981). International Migrant Workers’ Remittances: Issues andProspects (World Bank Staff Working Paper NO. 481).
  48. Tabit, S., Moussir, C.E. (2016). Macroeconomic determinants of migrants’ remittances: Evidence from a panel of developing countries. International Journal of Business and Social Research,6(7),1–11.https://doi.org/10.18533/ijbsr.v6i7.969
  49. UNCATAD, (2020). Economic Trends, Trade Indicators, and External Financial Resources, https://unctadstat.unctad.org/wds/ReportFolders/reportFolders.aspx.
  50. Vargas - Silva, C., & Huang, P.(2006). Macroeconomic Determinants of Worker’s Remittances: Host Versus Home Country’s Economic Conditions. Journal of International Trade & Economic Development,15(1), 81–99.https://doi.org/10.1080/09638190500525779
  51. World Bank, (2020a). World Development Indicators Data bank, https://databank.worldbank.org/source/world-development-indicators#.
  52. World Bank, (2020b). Migration and Remittances Data, https://www.worldbank.org/en/topic/migrationremittancesdiasporaissues/brief/migration-remittances-data.
  53. World Bank, (2020c). Remittances to low-and Middle-income Countries, https://blogs.worldbank.org/peoplemove/data-release-remittances-low-and-middle-income-countries-track-reach-551-billion-2019.
  54. Yang, Dean, & Choi, HwaJung (2007). Are Remittances Insurance? Evidence from Rainfall Shocks in the Philippines. World Bank Economic Review, 21(2), 219–248.https://doi.org/10.1093/wber/lhm003
  55. Yoshino N., Farhad, Taghizadeh-Hesary, &Miyu O. (2019). Determinants of International Remittance Inflows in Middle Income Countries in MENA, Asia and Pacific (Asian Development Bank Institute Working Paper Series No. 964).https://doi.org/10.2139/ssrn.3541026