Remittances and business cycles: evidence from Portugal

Correia, Leonida Amaral Tomas
Martins, Patricia Sofia Figueiredo
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Remittances play a central role in the study of the socio-economic effects of migration flows. A substantial amount of literature in this field has investigated the determinants of remittances and their impact in the long run. However, the cyclical properties of remittances are not yet well defined. We study this question for Portugal over the period from 1996 to 2015, to discover whether remittances received in Portugal are countercyclical or procyclical with Portuguese, French and Swiss outputs (France and Switzerland being the two main host remitting countries). Using bilateral correlations and econometric model regression approaches, we examine the ability of remittances to smooth macroeconomic shocks, and we compare their role with that of other external financial sources. Specifically, we try to understand whether the recent sovereign debt crisis, which had extensive negative economic and social consequences particularly in southern European countries, has changed the cyclicality of Portuguese remittance inflows. The empirical results suggest a positive answer.
migration , remittances , cyclicality , sovereign debt crisis , Portugal