The impact of remittances on household savings in the Baltics
-
DOIhttp://dx.doi.org/10.21511/imfi.18(1).2021.27
-
Article InfoVolume 18 2021, Issue #1, pp. 335-345
- Cited by
- 847 Views
-
439 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Proper understanding and monitoring of household savings are crucial to effective macroeconomic policies targeted at balanced and sustainable economic growth. Remittances, as a financial flow of foreign capital, can create a vital part of private savings. This paper is aimed at identifying whether remittances contribute to household savings in the Baltics along with other macroeconomic variables in a post-crisis period, during which the relative smoothing and convergence of economic development of the Baltic countries after the sharp financial distress in 2009 can be observed. The following methods of panel data regression analysis were employed: fixed effects and OLS. The results of the econometric analysis based on both fixed effects and OLS methods reveal that remittances are an essential driver of savings in the Baltics in the long run. Savings in the Baltics are not significantly influenced in the short term by sharp economic fluctuations, but are dependent on demographic factors and foreign capital, which can bring instability in economic development and financial flows of the region.
Acknowledgment
This research was funded by Vega research project no. 1/0037/20: “New challenges and solutions for employment growth in changing socio-economic conditions”, and VEGA research project no. 1/0287/19 “Integration of immigrants in EU countries from the point of view of migration policies”.
- Keywords
-
JEL Classification (Paper profile tab)E21, H32
-
References57
-
Tables5
-
Figures3
-
- Figure 1. GDP growth rate: volume percentage change on the previous year in the Baltics and EU28, %
- Figure 2. Population dynamics in the Baltics and EU28, thousands
- Figure 3. The household saving rate in the Baltics, % of disposable income
-
- Table 1. Description of variables
- Table 2. Summary statistics
- Table 3. Regression results
- Table 4. Collinearity test: variance inflation factors
- Table 5. Test for differing group intercepts, heteroscedasticity test, error distribution test
-
- Akter, S. (2018). Impact of remittance on domestic labour productivity in Bangladesh. Progressive Agriculture, 29(1), 33-44.
- Agunias D. R. (2006). Remittances and Development: Trends, Impacts and Policy Options: A Review of the Literature, Migration Policy Institute: Washington, DC.
- Ameriks, J., Caplin, A., & Leahy, J. (2002). Wealth Accumulation and the Propensity to Plan.
- Arif, I., Raza, S. A., Friemann, A., & Suleman, M. T. (2019). The Role of Remittances in the Development of Higher Education: Evidence from Top Remittance Receiving Countries. Social Indicators Research, 141(3), 1233-1243.
- Asian Development Bank, & World Bank. (2018). Migration and Remittances for Development in Asia.
- Azam, M., Haseeb, M., & Samsudin, S. (2016). The Impact of Foreign Remittances on Poverty Alleviation: Global Evidence. Economics & Sociology, 9(1), 264-281.
- Ashraf N., Aycinena D., Martinez C., & Yang D. (2014). Savings in Transnational Households: A Field Experiment among Migrants from El Salvador. Review of Economics and Statistics, 97(2), 332-351.
- Baldé, Y. (2011). The Impact of Remittances and Foreign Aid on Savings/Investment in Sub-Saharan Africa: Impact of Remittances and Foreign Aid on Savings. African Development Review, 23(2), 247-262.
- Basu, B., & Rajan, I. (2018). Investment Expenditure Behavior of Remittance Receiving Households: An Analysis Using Reserve Bank of India Data. Migration Letters, 15(3), 303-320.
- Batsaikhan, U., & Demertzis, M. (2018). Financial literacy and inclusive growth in the European Union.
- Bloom, D., Canning, D., & Graham, B. (2002). Longevity and Life Cycle Savings. Scandinavian Journal of Economics, 105(3), 319-338.
- Carment, D., & Calleja, R. (2018). Diasporas and Fragile states – beyond remittances assessing the theoretical and policy linkages. Journal of Ethnic and Migration Studies, 44(8), 1270-1288.
- Carvalho, C., Ferrero, A., & Nechio, F. (2017). Demographic Transition and Low US Interest Rates (FRBSF Economic Letter).
- Chezum, B., Bansak, C., & Giri, A. (2018). Are Remittances Good for Your Health? Remittances and Nepal’s National Healthcare Policy. Eastern Economic Journal, 44(4), 594-615.
- Cruz Zuniga, M. (2011). On the Path to Economic Growth, Do Remittances Help? Evidence from Panel VARs. The Developing Economies, 49(2), 171-202.
- Devasagayam, P. R., Calderon, F. J. M., & Motyl, N. A. (2016). A Cross-National Empirical Investigation of Music Streaming Behavior. International Journal of Academic Research in Business and Social Sciences, 6(5), 152-171.
- Dvorský, J., Petráková, Z., Polách, J. (2019). Assessing the Market, Financial, and Economic Risk Sources by Czech and Slovak SMEs. International Journal of Entrepreneurial Knowledge, 7(2), 30-40.
- Edwards, S. (1995). Why are Saving Rates so Different Across Countries? An International Comparative Analysis. New York: National Bureau of Economic Research.
- Esteves, R., & Khoudour-Castéras, D. (2011). Remittances, Capital Flows and Financial Development During the Mass Migration Period, 1870-1913. European Review of Economic History, 15(3).
- European Commission. (2018). The 2018 Pension Adequacy Report: current and future income adequacy in old age in the EU. Luxembourg: Publications Office of the European Union.
- Gani, A. (2016). Remittances and Savings in Asia: Some Empirical Evidence Based on the Life-Cycle Model. Journal of Finance and Economics, 4(1), 24-38.
- Grabowska, I., Garapich, M. P., Jaźwińska, E., & Radziwinowiczówna, A. (2017). Migrants as Agents of Change, 1-10.
- Ghosh B. (2006). Migrants’ Remittances and Development: Myths, Rhetoric and Realities. Geneva: International Organization for Migration.
- Gavurova, B., Ivankova, V., Rigelsky, M., & Přívarová, M. (2020). Relations Between Tourism Spending and Global Competitiveness – an Empirical Study in Developed OECD Countries. Journal of Tourism and Services, 21(11), 38-54.
- Haider, M. Z., Hossain, T., & Siddiqui, O. I. (2016). Impact of remittance on consumption and savings behavior in rural areas of Bangladesh. Journal of Business, 1(4), 25.
- Hastings, J. S., Madrian, B. C., & Skimmyhorn, W. L. (2013). Financial Literacy, Financial Education, and Economic Outcomes. Annual Review of Economics, 5(1), 347-373.
- Jappelli, T., & Padula, M. (2013). Investment in financial literacy and saving decisions. Journal of Banking & Finance, 37(8), 2779-2792.
- Kostakis, I. (2013). The Determinants of Householdss Savings During Recession: Evidence from Greece. SSRN Electronic Journal.
- Kumar, R. R., & Stauvermann, P. J. (2014). Exploring the Effects of Remittances on Lithuanian Economic Growth. Engineering Economics, 25(3), 250-260.
- Kumar, R. R., Stauvermann, P. J., Kumar, N. N., & Shahzad, S. J. H. (2018). Revisiting the threshold effect of remittances on total factor productivity growth in South Asia: A study of Bangladesh and India. Applied Economics, 50(26), 2860-2877.
- Loayza, N., Schmidt-Hebbel, K., & Serven, L. (2000). Saving in Developing Countries. World Bank Economic Review, 14(13), 393-414.
- Lusardi, A., & Mitchell, O. (2011). Financial Literacy and Planning: Implications for Retirement Wellbeing (pp. 17-39) (NBER Working Paper No. 17078).
- Lusardi, A. (2004). Saving and the Effectiveness of Financial Education. SSRN Electronic Journal.
- Maduekwe, N. I., & Adesina, F. (2017). Remittances economy, remittances landscape: An analysis of the economic and socioecological implications of remittances to households in South Eastern Nigeria. GeoJournal, 82(1), 139-155.
- Makhlouf, F. (2019). Is Productivity Affected by Remittances? The Evidence from Morocco: Financial inflows to Morocco. Journal of International Development, 31(2), 211-222.
- Matuzeviciute, K., & Butkus, M. (2016). Remittances, Development Level, and Long-Run Economic Growth. Economies, 4(4), 28.
- Meseguer, C., Ley, S., & Ibarra-Olivo, J. E. (2017). Sending money home in times of crime: The case of Mexico. Journal of Ethnic and Migration Studies, 43(13), 2169-2192.
- Niculescu-Aron, I., & Mihăescu, C. (2012). Determinants of Household Savings in EU: What Policies for Increasing Savings? Procedia – Social and Behavioral Sciences, 58, 483-492.
- OECD. (2013). Coping with Emigration in Baltic and East European Countries. Paris: OECD Publishing.
- OECD. (2015). National Strategies for Financial Education. OECD/INFE Policy Handbook.
- OECD (2017) Incomes of older people. In OECD, Pensions at a Glance 2017.
- OECD. (2018). The Role and Design of Net Wealth Taxes in the OECD. Paris: OECD Publishing.
- Onwuchekwa, R. I. & Aniocha, M. Ch. (2017). Migrant Remittances, Savings and Investments Among Rural Farm Households in Abia State, Nigeria. Journal of Nutritional Ecology and Food Research, 4(1), 28-33.
- Pajaron, M. C. (2017). The role of remittances as a risk-coping mechanism: Evidence from agricultural households in rural Philippines. Asian and Pacific Migration Journal, 26(1), 3-30.
- Poissonnier, A., European Commission, & Directorate-General for Economic and Financial Affairs. (2017). The Baltics: Three countries, one economy.
- Quartey, P., Ackah, C., & Lambon-Quayefio, M. P. (2019). Inter-linkages between remittance and savings in Ghana. International Journal of Social Economics, 46(1), 152-166.
- Raza, S. A. (2015). Foreign Direct Investment, Workers’ Remittances And Private Saving In Pakistan: An Ardl Bound Testing Approach. Journal of Business Economics and Management, 16(6), 1216-1234.
- Reisch, L. A., & Zhao, M. (2017). Behavioural economics, consumer behaviour and consumer policy: State of the art. Behavioural Public Policy, 1(02), 190-206.
- Rocher, S., Stierle, M. H., European Commission, & Directorate-General for Economic and Financial Affairs. (2015). Household saving rates in the EU: Why do they differ so much? Luxembourg: Publications Office.
- Sabra, M. M. (2016). Remittances Impact on Economic Growth, Domestic Savings and Domestic Capital at the Presence of ODA and FDI in Selected MENA Countries. International Journal of Regional Development, 3(2), 26.
- Stango, V., & Zinman, J. (2009). Exponential Growth Bias and Household Finance. The Journal of Finance, 64(6), 2807-2849.
- Strielkowski, W., Rausser, G., Bilan, Y., & Tsevukh, Y. (2018). Migrant remittances and their impact on the economic development of the Baltic States. Geographica Pannonica, 22(3).
- Syed, H., Nigar, S., & Ullah, S. (2017). An Analysis of Household Saving and Investment Behavior among Different Income Groups in Urban Area of District Peshawar. IBusiness, 9(4), 188-202.
- Temel Nalın, H. (2013a). Determinants of household saving and portfolio choice behaviour in Turkey. Acta Oeconomica, 63(3), 309-331.
- Temel Nalın, H. (2013b). Determinants of household saving and portfolio choice behaviour in Turkey. Acta Oeconomica, 63(3), 309-331.
- van Rooij, M., Lusardi, A., & Alessie, R. (2011). Financial literacy and stock market participation. Journal of Financial Economics, 101(2), 449-472.
- Wadood, S. N., & Hossain, Md. A. (2017). Microeconomic impact of remittances on household welfare: Evidences from Bangladesh. Business and Economic Horizons, 13(1), 10-29.