The impact of adverse weather conditions and financial development on remittances
Date
2017-12-18
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Abstract
This study tests for the behavior of remittances in times of thin financial markets and extreme
rainfall condition to determine whether remittances serve as insurance or investments. Given the
assumption that migrant workers are altruistic, it is assumed that remittances would increase in times of
extreme weather conditions and low levels of domestic credit. But contrary to the hypothesized results,
migrants decrease their remittances in times of adverse weather conditions. Furthermore, there is a positive
relationship between financial development and remittances. These results are in favor of the investment
motive of remittances. However, the positive relationship with the foreign exchange rate, inflation rate, and
unemployment rate and the negative relationship with the interest rate suggest otherwise. They still seem
to support the initial hypothesis that migrant workers remit altruistically, seeking to meet their families’
lack of disposable income and domestic credit. Evidently, migrant motives for remittances cannot be solely
for insurance or investment. As presented in the model, both play into consideration.
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Keywords
remittances, financial market, extreme rainfall