How Does the Flow of Remittances Affect the Trade Balance of the Middle East and North Africa?
Mohammad Reza Farzanegan & Sherif Maher Hassan (2019) How does the flow of remittances affect the trade balance of the Middle East and North Africa?, Journal of Economic Policy Reform, DOI: 10.1080/17487870.2019.1609357
Posted: 3 Jun 2019
Date Written: May 11, 2019
The Middle Eastern and North African (MENA) economies have one of the highest degrees of dependency on received remittances worldwide. In this study, we have examined the role of remittances in the trade balance of 11 labour abundant MENA countries. Our panel regression analysis showed that the inflow of remittances has fostered the trade deficit. We also found that the final effect of remittances depends on the level of domestic capital formation. The results are robust after controlling for other drivers of trade deficit such as income, inflation, exchange rate and institutions as well as country and year fixed effects.
Keywords: Remittances, Middle East and North Africa, trade balance, panel fixed effects
JEL Classification: C23, F22, F14
Suggested Citation: Suggested Citation