Defying the Odds: Remittances During the COVID-19 Pandemic

IMF Working Papers, July 16, 2021

Source details

Authors: Kangni R Kpodar, Montfort Mlachila, Saad N Quayyum, Vigninou Gammadigbe
Published: July 16, 2021
Series: IMF Working Papers
DOI: https://doi.org/10.5089/9781513578453.001

Authors: Kangni R Kpodar, Montfort Mlachila, Saad N Quayyum, Vigninou Gammadigbe
Publication date: July 16, 2021
Scope: early assessment of remittance dynamics and drivers during the COVID-19 pandemic using a newly compiled monthly remittance dataset for a sample of 52 countries, of which 16 countries with bilateral remittance data.
Estimation period for impulse response functions: Jan 2020-Dec 2020
Pages: 35
Series: Working Paper No. 2021/186
DOI: https://doi.org/10.5089/9781513578453.001

Remittances showed strong resilience despite an unprecedented global recession triggered by the pandemic.
Using the local projection approach to estimate impulse response functions, the paper provides evidence that:
- Remittances responded positively to COVID-19 infection rates in migrant home countries, underscoring remittances' role as an important automatic stabilizer.
- Stricter containment measures have the unintended consequence of dampening remittances.
- A shift from informal to formal remittance channels due to travel restrictions appears to have played a role in the surge in formal remittances.
The size of the fiscal stimulus in host countries is positively associated with remittances, as the fiscal response cushions the economic impact of the pandemic.

Dataset: newly compiled monthly remittance dataset covering 52 countries, including bilateral remittance data for 16 countries.
Empirical approach: local projection approach to estimate impulse response functions of remittance flows over Jan 2020-Dec 2020.
Variables highlighted in analysis include infection rate, containment measures, channel (informal vs formal) of remittances, and size of fiscal stimulus in host countries.

Remittances act as an automatic stabilizer for migrant home economies when infection rates rise.
Containment policies can have trade-offs by reducing remittance flows; policymakers should consider measures to mitigate these unintended effects.
Facilitating formal remittance channels (especially when travel restrictions limit informal channels) can support remittance inflows.
Host-country fiscal stimulus supports remittance flows by cushioning migrants' incomes and ability to send funds.

Subject: Balance of payments, COVID-19, Fiscal policy, Fiscal stimulus, Health, Inward remittances, Migration, Population and demographics, Remittances
Keywords: corridor data, COVID-19, Fiscal stimulus, Global, home economy, impulse response function, infection rate, Inward remittances, Migration, remittance flow, Remittances, Shocks

Source: IMF Working Paper No. 2021/186, "Defying the Odds: Remittances During the COVID-19 Pandemic", July 16, 2021.