## Smooth Operator: Remittances and Fiscal Shocks

_IMF Working Papers, July 19, 2017_

## Source details

**Canonical URL:** [Smooth Operator: Remittances and Fiscal Shocks](https://www.imf.org/en/publications/wp/issues/2017/07/19/smooth-operator-remittances-and-fiscal-shocks-45022)

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## Bibliographic details
- Authors: Kimberly Beaton, Serhan Cevik, Reza Yousefi
- Published: July 19, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484307878.001

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### Background
- With 250 million migrants globally, remittances are one of the major sources of income in many developing countries.
- The literature documents that remittances facilitate consumption smoothing in receiving countries, but prior work had not considered variation with fiscal stance or during fiscal shocks.

### Research focus and methodology
- Investigates the impact of remittances on the stability of household consumption using both cross-country and household-level datasets.
- Focuses on:
  - Whether the consumption-smoothing effect changes with fiscal policy phases (fiscal consolidation versus fiscal expansion).
  - Whether remittances and government support are substitutes or complements in stabilizing household consumption.

### Key findings
- Remittances help smooth consumption, and hence improve welfare, more during fiscal consolidation episodes.
- The consumption-smoothing impact of remittances is insignificant during fiscal expansions.
- The remittance-smoothing effect is more pronounced in countries with greater reliance on remittances.

### Policy implications and interpretation
- During fiscal consolidations, remittances play a stronger role as a private buffer for household consumption when public support is constrained.
- In fiscal expansions, government support appears to lessen the incremental consumption-smoothing role of remittances (effect statistically insignificant).
- Policy design in high-remittance countries should account for the complementary role remittances can play in stabilizing household consumption, especially when fiscal space tightens.

*IMF Working Paper "Smooth Operator: Remittances and Fiscal Shocks", Kimberly Beaton, Serhan Cevik, and Reza Yousefi; July 19, 2017.*

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_Source: https://www.imf.org/en/publications/wp/issues/2017/07/19/smooth-operator-remittances-and-fiscal-shocks-45022_