AN ANALYSIS OF MACROECONOMIC DETERMINANTS OF REMITTANCES IN SOUTHERN AFRICA
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Date
2020-09-29
Authors
SINGOGO, FWASA K
Journal Title
Journal ISSN
Volume Title
Publisher
UNVERSITY OF NAMIBIA
Abstract
The study analyzed macroeconomic determinants of remittances in Southern Africa and
made use of annual data for the period ranging from 2003 to 2016. The macroeconomic
determinants used include: remittances themselves, the inflation rate, GDP growth rate, the
nominal exchange rate, broad money and age dependency ratio. In doing so, the study further
analyzed cyclicality and the volatility of remittances in the region in order to get a more
rounded perspective. In seeking to meet its objectives, a panel study was carried out using
both the fixed and random methods of which the random method was found to be most
appropriate. The Southern African countries included in the study were Botswana, Lesotho,
Malawi, Mozambique, South Africa, Swaziland and Zambia. Other major tests applied
included a Standard deviation test for volatility; the Hodrick Prescott (HP) filter with
detrended series, to analyze for cyclicality; and cross correlation tests to determine if there
existed pro or counter cyclical behavior. The study found that amongst the macroeconomic
determinants used; only GDP growth (changes/improvements in the home countries’
economic environment) and the exchange rate were statistically significant with respective
positive relationships with remittance inflows. It was also found that volatility of remittances
was low, which was evidently reflected in the values of the standard deviations with the
highest being 1.784. In regards to cyclicality, the tests exhibited prominence of pro cyclical
behavior which could imply that migrants optimize placement of their savings between origin
and destination countries of which the remitting of funds is a form of investment. However,
several periods of counter cyclicality were observed that made it hard to out-rightly conclude
pro cyclicality as being the definite trend.
Description
Macroeconomics