Working paper

Supriyo De, Ergys Isamaj, M. Ayhan Kose, S. Reza Yousefi

Thematic Working Groups
Remittances and Diaspora Resources
East Asia and Pacific
Europe and Central Asia
Latin America and the Caribbean
Middle East and North Africa
North America
South Asia
The World Region

This paper examines the behavior of remittances over the business cycle and their potential to act as a stabilizer during periods of high business cycle volatility. Four main findings are reported. First, in theory, the cyclical behavior of remittances depends on the motives to remit. Second, remittances are less volatile than other foreign currency flows but do not appear to systemically co-move with business cycle fluctuations. Third, remittances are relatively stable even during episodes of sharp business cycle volatility, such as those associated with sudden stops and financial crises. Finally, remittances can help support consumption stability over the business cycle.