Remittances in Russia and Caucasus and Central Asia: The gravity model

Abstract

Remittances are an important source of external financing in low-and middle-income countries. This paper uses the gravity model to analyze remittance flows in Russia and Caucasus and Central Asia countries. Standard gravity determinants, such as gross domestic product in sending and receiving countries, bilateral distance, existence of common borders and common official language, and fit remittance, flow well. Remittances also react to inflation and exchange rate movements in recipient countries to sustain their purchasing power. In line with the altruism hypothesis, remittances flow to countries with higher age dependency ratio. Remittances are countercyclical and help stabilize outputs in recipient countries. However, global shocks resulting in sharp output losses of sending countries would lead to large volatility and decline in remittance inflows in recipient countries.

Empirical evidence on the relationship between migrants' remittances and private investment in Burkina Faso: A dynamic simultaneous equation model

“…The literature on the macroeconomic determinants of remittances considers financial development, government stability, the level of economic activity in the home and host countries and the foreign exchange market (Elijah & Hamzah, 2022; Gupta et al, 2009; Hor & Pheang, 2017; Poghosyan, 2023; Singh, 2010). Poghosyan (2023) uses a gravity model to show the countercyclical behaviour of migrant remittances in the case of Russia, the Caucasus and Central Asia. The author finds that migrants reduce their financial transfers when the level of economic activity in the home country improves.…”

“…In the self‐interest motive, migrants' remittances primarily serve investment purposes (Glytsos, 1988; Mallick, 2012). The literature on macroeconomic determinants considers financial development, government stability, the level of economic activity in the home and host countries and the foreign exchange market (Elijah & Hamzah, 2022; Gupta et al, 2009; Hor & Pheang, 2017; Poghosyan, 2023; Singh, 2010).…”

Macroprudential Policies to Enhance Financial Stability in the Caucasus and Central Asia

“…Financial dollarization has been historically elevated in the CCA due to the post-Soviet transition in the 1990s, which was characterized by very volatile exchange rates, 1 Due to historical and structural factors, several countries in the CCA depend on Russia as a major export and import market, as well as a source of remittances. See also Poghosyan (2020). 2 See also Countercyclical Fiscal Measures for Recovery, Joint Development Partner Presentation, CAREC Economic and Financial Stability Cluster Forum, October 2020.…”

Efficiency of the Identity-Sensitive EU Conditionality: A Case of Serbia and the Sanctions Pressuring

“…There have already been published a significant number of various academic analyses regarding the effects of the Ukrainian "crisis". Studies address not only the post-Soviet space but also the consequences of the invasion for the political and economic dependency of Central Asian states on Russia (Malashenko 2022), remittance flows (Poghosyan 2023), or the security of Nagorno-Karabakh (Giuashvili 2022). There are also numerous studies of the consequences of the invasion for the Western Balkans.…”