{ "title": "Managing Remittances Inflows with Foreign Exchange Intervention", "publication": "IMF Working Papers, September 6, 2024", "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2024/09/06/managing-remittances-inflows-with-foreign-exchange-intervention-554229", "canonical": "https://www.imf.org/en/publications/wp/issues/2024/09/06/managing-remittances-inflows-with-foreign-exchange-intervention-554229", "overlayPath": "/en/publications/wp/issues/2024/09/06/managing-remittances-inflows-with-foreign-exchange-intervention-554229/index.md", "summary": "In a 157 emerging markets and developing countries sample, remittances continue to grow fast, outpacing other financial inflows (as a share of GDP), particularly in Asia.", "sections": [ { "heading": "Summary", "content": "- In a 157 emerging markets and developing countries sample, remittances continue to grow fast, outpacing other financial inflows (as a share of GDP), particularly in Asia.\n- Foreign exchange interventions (FXIs) have often been the authorities’ go-to tool to manage the short-term effects of these remittance inflows when alternative policy instruments are lacking.\n- FXIs are described as quick, temporary solutions that often may hinder the development of the recipient country’s financial sector and may not support financial stability over the medium term.\n- The analysis suggests FXIs act as an insurance tool that, by mitigating FX volatility, protect remittance recipients and tradable sectors from FX risks, encouraging:\n - less bank deposits (consistent with more spending), and\n - lower buffers in the banking sector.\n- These costs add to other direct FXI-related costs already identified in the literature.\n- The development of private sector market risk management tools should support longer-term structural reforms required to increase the absorptive capacity of additional FX inflows." }, { "heading": "Key findings and mechanisms", "content": "- Sample size: 157 emerging markets and developing countries.\n- Geographic emphasis: particularly pronounced effects in Asia.\n- Remittances growth: remittances grow fast and outpace other financial inflows as a share of GDP.\n- FXI role:\n - Used to manage short-term effects of remittance inflows.\n - Mitigates foreign exchange volatility.\n - Acts as an insurance-like mechanism for remittance recipients and tradable sectors.\n- Financial sector effects:\n - FXIs are associated with reduced bank deposits and lower banking-sector buffers.\n - Potentially hinder the development of the recipient country’s financial sector.\n- Stability implications:\n - FXIs may not support financial stability over the medium term.\n - Costs from FXIs compound with other direct FXI-related costs discussed in existing literature." }, { "heading": "Policy implications and recommendations", "content": "- Relying primarily on FXIs to manage remittance inflows carries short-term benefits but medium-term costs for financial sector development and stability.\n- Priority policy directions:\n - Develop private sector market risk management tools.\n - Pursue longer-term structural reforms to increase the absorptive capacity of additional FX inflows.\n- Where possible, consider alternatives to FXIs to avoid discouraging bank deposits and eroding banking-sector buffers." }, { "heading": "Publication and metadata", "content": "- Authors: Maria-Angels Oliva, Nika Khinashvili\n- Publication date: September 6, 2024\n- Series: Working Paper No. 2024/191\n- Volume: 2024\n- Issue: 191\n- Pages: 45\n- DOI: https://doi.org/10.5089/9798400285677.001\n- Stock No: WPIEA2024191\n- ISBN: 9798400285677\n- ISSN: 1018-5941\n- Subject keywords: Balance of payments, Bank deposits, Commercial banks, Financial institutions, Financial services, Foreign direct investment, Foreign exchange, Remittances\n- Geographic keywords: Africa, Asia and Pacific, Eastern Europe, Middle East, Western Hemisphere\n\nSource: Maria-Angels Oliva and Nika Khinashvili, \"Managing Remittances Inflows with Foreign Exchange Intervention\", IMF Working Papers 2024, 191 (2024).\n\n---\n\n Content in this bundle\n\n- Working Paper\n - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2024/09/06/managing-remittances-inflows-with-foreign-exchange-intervention-554229" } ], "bullets": [ "[Markdown version](/en/publications/wp/issues/2024/09/06/managing-remittances-inflows-with-foreign-exchange-intervention-554229/index.md)", "[Structured JSON version](/en/publications/wp/issues/2024/09/06/managing-remittances-inflows-with-foreign-exchange-intervention-554229/index.json)", "[Bundle manifest](/en/publications/wp/issues/2024/09/06/managing-remittances-inflows-with-foreign-exchange-intervention-554229/bundle-manifest.json)", "Authors: Maria-Angels Oliva, Nika Khinashvili", "Published: September 6, 2024", "Series: IMF Working Papers", "DOI: https://doi.org/10.5089/9798400285677.001", "In a 157 emerging markets and developing countries sample, remittances continue to grow fast, outpacing other financial inflows (as a share of GDP), particularly in Asia.", "Foreign exchange interventions (FXIs) have often been the authorities’ go-to tool to manage the short-term effects of these remittance inflows when alternative policy instruments are lacking.", "FXIs are described as quick, temporary solutions that often may hinder the development of the recipient country’s financial sector and may not support financial stability over the medium term.", "The analysis suggests FXIs act as an insurance tool that, by mitigating FX volatility, protect remittance recipients and tradable sectors from FX risks, encouraging:", "These costs add to other direct FXI-related costs already identified in the literature.", "The development of private sector market risk management tools should support longer-term structural reforms required to increase the absorptive capacity of additional FX inflows.", "Sample size: 157 emerging markets and developing countries.", "Geographic emphasis: particularly pronounced effects in Asia.", "Remittances growth: remittances grow fast and outpace other financial inflows as a share of GDP.", "FXI role:", "Financial sector effects:", "Stability implications:", "Relying primarily on FXIs to manage remittance inflows carries short-term benefits but medium-term costs for financial sector development and stability.", "Priority policy directions:", "Where possible, consider alternatives to FXIs to avoid discouraging bank deposits and eroding banking-sector buffers.", "Authors: Maria-Angels Oliva, Nika Khinashvili", "Publication date: September 6, 2024", "Series: Working Paper No. 2024/191", "Volume: 2024", "Issue: 191", "Pages: 45", "DOI: https://doi.org/10.5089/9798400285677.001", "Stock No: WPIEA2024191", "ISBN: 9798400285677", "ISSN: 1018-5941", "Subject keywords: Balance of payments, Bank deposits, Commercial banks, Financial institutions, Financial services, Foreign direct investment, Foreign exchange, Remittances", "Geographic keywords: Africa, Asia and Pacific, Eastern Europe, Middle East, Western Hemisphere", "**Working Paper**" ], "related": [ { "title": "Working Paper", "role": "paper", "sourceUrl": "https://www.imf.org/-/media/files/publications/wp/2024/english/wpiea2024191-print-pdf.pdf", "summary": { "path": "/-/media/files/publications/wp/2024/english/wpiea2024191-print-pdf.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/wp/2024/english/wpiea2024191-print-pdf.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/publications/wp/issues/2024/09/06/managing-remittances-inflows-with-foreign-exchange-intervention-554229/index.md", "json": "/en/publications/wp/issues/2024/09/06/managing-remittances-inflows-with-foreign-exchange-intervention-554229/index.json", "bundleManifest": "/en/publications/wp/issues/2024/09/06/managing-remittances-inflows-with-foreign-exchange-intervention-554229/bundle-manifest.json" }, "generatedAtUtc": "2026-09-17T00:36:31.272Z" }