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Do remittances dampen the effect of natural disasters on output growth volatility in developing countries?

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Abstract:

This article examines whether or not remittance inflows help mitigate the effects of natural disasters on the volatility of the real output per capita growth rate. Using a large sample of developing countries and mobilizing a dynamic panel data framework, it uncovers a diminishing macroeconomic destabilizing consequence of natural disasters as remittance inflows rise. It appears that the effect of natural disasters disappears for a remittance ratio above 8% of the Gross Domestic Product (GDP). However, remittances aggravate the destabilizing effects of natural disasters when they exceed 17% of the GDP. Finally, the article shows that current and lagged remittance inflows significantly reduce the number of people killed by natural disasters and the number of people affected, respectively.

Keywords: E32; F22; Q54; natural disasters; output growth volatility; remittances

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036846.2012.659347

Affiliations: 1: International Monetary Fund, Washington, USA 2: CERDI-Universit√© d’Auvergne Clermont1, Clermont Ferrand, France

Publication date: June 1, 2013

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