The Impact of Remittances on Economic Activity: The Importance of Sectoral Linkages

Hector Perez-Saiz, Jemma Dridi, Tunc Gursoy and Mounir Bari

No 2019/175, IMF Working Papers from International Monetary Fund

Abstract: We propose a simple macroeconomic model with input-output sectoral linkages based on Acemoglu et al. (2016) to quantify how changes in aggregate demand due to additional income from household’s remittances propagates through the network of input-output linkages in Sub-Saharan African countries. We first propose two network centrality measures to assess the role of some sectors as key input providers in the economy. Then, we use these measures to quantify the effect of sectoral linkages on sectoral and total output following an increase in remittances inflows. Our empirical results suggest that the effects of remittances on recipient economies increase with the degree of linkages across sectors, which is especially prominent in the case of the financial intermediation sector. Our paper contributes to the emerging macroeconomic literature on the propagation of shocks across sectors and the implications for the whole economy.

Keywords: WP; remittances inflow; economic growth; Remittances; Sub-Saharan Africa; networks; centrality; remittances data; remittances inlows; remittances flow; remittances receipts; remittances matter; remittances recipient; remittances transaction; SSA economy; remittance-sending country; Production growth; Consumption; Labor supply; Income; Africa (search for similar items in EconPapers)
Pages: 37
Date: 2019-08-16
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Citations: View citations in EconPapers (7)

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