Econometric estimation of the determinants and impact of remittances on the Macedonian economy
Date Issued
2013-09
Author(s)
Abstract
Although Macedonia is among the top emigration countries in the world,
and in spite of the fact that private transfers from abroad have covered
more than 50% of the trade deficit in the last ten years, relatively little is
known about the determinants of the remittances and their impact on the
macroeconomic stability of the Macedonian economy. The purpose of our
paper is to offer an econometric estimation of the determinants of
remittances to Macedonia and to investigate whether remittances sent to
Macedonia have a stabilizing or destabilizing effect on the Macedonian
economy, especially in time of financial shocks. To achieve this objective,
we estimate a vector autoregressive (VAR) model using the available
monthly data on migrant workers’ remittances as a dependent variable
and industrial output, gross wages, unemployment rate, consumer price
indices, trade deficit, total imports and loans to private sector as
independent variables in a long period (January 2005 - December 2012).
We find evidence that remittances sent to Macedonia have a procyclical
character meaning that they act as a boost to economic activity in times of
economic upturns, and as a destabilizing factor to the Macedonian
economy in times of economic downturns.
and in spite of the fact that private transfers from abroad have covered
more than 50% of the trade deficit in the last ten years, relatively little is
known about the determinants of the remittances and their impact on the
macroeconomic stability of the Macedonian economy. The purpose of our
paper is to offer an econometric estimation of the determinants of
remittances to Macedonia and to investigate whether remittances sent to
Macedonia have a stabilizing or destabilizing effect on the Macedonian
economy, especially in time of financial shocks. To achieve this objective,
we estimate a vector autoregressive (VAR) model using the available
monthly data on migrant workers’ remittances as a dependent variable
and industrial output, gross wages, unemployment rate, consumer price
indices, trade deficit, total imports and loans to private sector as
independent variables in a long period (January 2005 - December 2012).
We find evidence that remittances sent to Macedonia have a procyclical
character meaning that they act as a boost to economic activity in times of
economic upturns, and as a destabilizing factor to the Macedonian
economy in times of economic downturns.
Subjects
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