Remittances, FDI and ODA: stability, cyclicality and stabilising impact in developing countries

Abstract

Received wisdom that remittances are stable is based on global rather than individual country figures. And findings in a majority of studies that remittances are counter-cyclical are not based on individual country analysis. This paper fills this knowledge gap by examining, for 116 developing countries over three decades (1980–2007), the stability, cyclicality and stabilising impact of remittances (REM), official development aid (ODA) and FDI, obtaining new results. Note that these flows can be both counter-cyclical anddestabilising. Findings for a majority of countries, regions and income groups are: 1) ODA is more stable than REM, which is more stable than FDI; 2) ODA is counter-cyclical and REM is pro-cyclical, though less than FDI; 3) ODA is stabilising and REM destabilising, though less than FDI; 4) counter-(pro-)cyclical ODA, REM and FDI flows are destabilising (stabilising) in a substantial number of countries, regions and income groups