Remittances Inflows and Fiscal Space in Receiving Countries

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.