Macroeconomic Determinants Of Remittances:Evidence From Low And Middle Income Countries

Recently,remittances are perceived as a crucial element for development in low and middle income countries,which have increased rapidly due to the scale of international migrations and become the second largest source of capital inflows.Policy makers have started to encourage progress on understanding and facilitating remittances through formal financial systems.However,scholars rarely focused on the motives and macroeconomic determinants of remittances.In this paper,I try to investigate why remittances are remitted by testing the impact of macroeconomic determinants on remittances in the low and middle income countries.Detailed definition and composition of remittances are given by the BPM6.With the status analysis of remittances,this paper estimates the impact of different macro determinants on remittances for the total samples.The method of system GMM is used to run the dynamic panel regression analysis.Second,fixed-effect panel threshold model is applied to the sub-sample analysis.In this part,different impact of regime-dependent variables on remittances might indicate the evolution of the motivations of remittances.The conclusions are summarized as follows.First,self-interest is the dominant reason for remitting in 83 low and middle income countries.Second,altruistic remittances show up when the real GDP per capita is extremely low,and it would be dominated by other motives as the real GDP per capita exceeds a certain critical value.Third,the positive effect of cutting the cost of remittances will weaken by the development of the economy.Fourth,the government effectiveness and openness of the home countries will positively affect the inflows of remittances,while the impact of inflation on remittances is negative.