Title: The macro stabilization role of migrants FDI contributions and wage remittances
Authors: Patrick NCho - Center for Development Economics (Cote d'Ivoire)
Borel Ntsafack - Center for Development Economics (Cameroon) [presenting]
Peter Pedroni - Williams College (United States)
Abstract: Migration has long been understood to be responsive to international wage and household welfare differentials and therein to serve as an important mechanism to raise income levels for developing economies. What has been less understood is the potential short-run macro stabilization role that remittances, as well as FDI contributions from migrants, can play, both for the countries of origin as well as the host countries. To investigate this, we employ a heterogeneous panel structural VAR approach to estimating the stabilization effect on aggregate income fluctuations due to remittances and FDI contributions associated with migrants. In particular, we find that the macro stabilization role is strongest for economies that are characterized as informal, poorly resource endowed and characterized as fragile states. We also demonstrate how the technique can be used to forecast the quantitative implications of remittances and migrant FDI contributions for individual countries that have large migrant outflows, but for which high-quality data is not available. Examples include Afghanistan, Myanmar, South Sudan, Venezuela and Yemen. In addition, we use the technique to explore the potential enhanced stabilization benefits from migrant contributions for African countries that join currency unions.