Abstract

The current article contributes to the literature on the effect of remittances inflows on public finance by examining the effect of remittances inflows on fiscal space. Using a sample of 109 receiving countries over the period 1980-2015, the analysis has shown that remittances inflows contribute to the expansion of fiscal space in relatively less developed receiving countries, while in advanced economies, these capital inflows lead to a shrinking of fiscal space. The analysis has additionally revealed that countries that experience a higher economic growth consistently experience an expansionary fiscal space effect of remittances inflows.