Do Business Cycles in the Home and Host Countries Affect Remittances? A Closer Look at the Remittance Inflows to the Philippines during the Global Financial Crisis

This paper examined the impact of the global financial crisis (2007 to 2009) on the level of remittance flows in the Philippines and find that remittances did not decrease, albeit growing at a slower pace at the aggregate level. This suggests that remittances during the crisis have been procyclical. The stock of mi-grants, nature of work (service sector), and the policy response (Canada) are some of the factors identified which have contributed in the resiliency of remittances during the crisis. Following that, I focused on the nine major coun-tries to check per if remittances inflows from these countries decreased during the crisis. At the host country level, remittance appears to be countercyclical with all the host countries, except USA, Hongkong and Italy, as reflected by the decline in remittances during the recession in these countries. Next, the cyclical relationship of remittances and output in the home and host countries were measured from 1989 to 2012 using first-difference correlation and ECM model. The results of the first-difference correlation suggested a procyclical relationship of remittances and output of Saudi Arabia and Italy. On the other hand, the ECM results showed that remittances have long-run, positive relationships with Saudi Arabia and Canada. It is worthy to note that the level of output in the home country and in the other host countries do not have any impact on the level of remittances in the long-run. This suggests that remittances are stable sources of external financing even during periods of economic hardships.