The Impact of macroeconomic instability on remittance inflows to Egypt during the Period (1980-2021)

Elsharkawy, Rania

doi:10.21608/inp.2024.241638.1065

	The Impact of macroeconomic instability on remittance inflows to Egypt during the Period (1980-2021)
المجلة المصرية للتنمية والتخطيط
Article 5, Volume 32, Issue 2, June 2024, Pages 75-57 PDF (6.43 M)
Document Type: المقالة الأصلية
DOI: 10.21608/inp.2024.241638.1065
Author
Rania Elsharkawy^*
Assistant Professor of Economics- Faculty of Economic Studies and Political Science- Alexandria University
Abstract
This paper examines how macroeconomic instability impacts remittance inflows to Egypt over the period (1980-2021). The study constructed a comprehensive macroeconomic instability index using principal component analysis (PCA). An autoregressive distributed lag (ARDL) bounds testing approach is employed to estimate the impact of macroeconomic instability on remittance inflows. The results revealed that macroeconomic instability has a positive and statistically significant impact on remittance inflows to Egypt. Furthermore, remittances respond negatively to real GDP per capita in the home country, and positively to international oil prices and exchange rate. These results are consistent with dominance of the altruistic motive of remittances and provide evidence on their countercyclicality. The results reveal the compensatory reaction of remittances to the negative consequences of macroeconomic instability during the periods of economic hardship and their role in absorbing macroeconomic shocks. Although macroeconomic instability induces altruistically motivated remittances, government policies are required to mobilize remittance savings, attract investment-induced remittances, and direct them towards domestic productive investments.
Keywords
macroeconomic instability- remittances inflows- principal component analysis- ARDL bounds testing; Egypt

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