Remittances are one of the less volatile sources of foreign exchange earnings for developing countries. While capital flows tend to rise during favorable economic cycles and declines in bad times, remittances tend to be counter-cyclical relative recipient countries economic cycles. Historically remittance flows have also been resilient to downturns in the migrant-destination countries. Remittance flows to developing countries are expected to remain more resilient than private flows-which are expected to fall sharply if global liquidity continues to remain tight-and even compared to official development assistance (ODA).There are several reasons for the resilience of remittance flows during economic downturns which include:[1]
a). Remittances are sent by the cumulated flows of migrants over the years, not only by the new migrants of the last year or two. This makes remittances persistent over time. If new migration stops, then over a period of a decade or so, remittances may stop growing. But they will continue to increase as long as migration flows continue.
b). Remittances are a small part of migrants incomes, and migrants continue to send remittance when hit by income shocks.
c). Because of a rise in anti-immigration sentiments and tighter border controls, the duration of migration appear to have increased. Those staying back are likely to continue to send remittances.
d) If migrants do return, they are likely to take back accumulated savings.
a). Remittances are sent by the cumulated flows of migrants over the years, not only by the new migrants of the last year or two. This makes remittances persistent over time. If new migration stops, then over a period of a decade or so, remittances may stop growing. But they will continue to increase as long as migration flows continue.
b). Remittances are a small part of migrants incomes, and migrants continue to send remittance when hit by income shocks.
c). Because of a rise in anti-immigration sentiments and tighter border controls, the duration of migration appear to have increased. Those staying back are likely to continue to send remittances.
d) If migrants do return, they are likely to take back accumulated savings.
[1]
Dilip Ratha, Sanket Mohapatra and Zhimei Xu, et.al. p.12(http://www.worldbank.org/prospects/migration
and ramittances)