Remittances and Economic Growth (Evaluation Skills Video)

Core Notes:

Remittances inject extra income into the circular causing an increase in consumer spending and aggregate demand

Eval: The effect depends on the propensity to consume of families receiving remittances. Some may choose to pay off debt or accumulate savings rather spend it

A higher inflow of remittances  will increase savings deposits in the banking system which can help finance investment

Eval: Whether higher savings drives increased investment depends on the efficiency of the banking system to allocate capital efficiently.

Higher remittances allows families to invest in seeds, livestock and equipment to raise factor productivity

Eval: This depends on how much finds its way to poorer families. The transactions cost of money transfers is often high (more than 10%).