Flow of migrants' remittances into Sudan: the role of macroeconomic environment

Abstract

Considering the importance of migrants' remittances as a vital source of financing economic development and foreign exchange in Sudan's economy, this study investigates the role of the macroeconomic environment in attracting migrants' remittances into Sudan. The study uses the autoregressive distributed lag approach to cointegration, impulse response functions (IRSs) and variance decomposition (VDC) techniques. The empirical results indicate that macroeconomic policy variables play an important role in encouraging the flow of remittances via formal channels. The inflation rate and the black market exchange rate premium have a negative effect on remittances in both short and long run. The home income variable is found to discourage the flow of remittances, supporting the altruistic behavior of emigrants in transferring money. Moreover, the study found that foreign income exerts positive and significant effects on remittances. Based on these findings, the paper concludes with some policy implications regarding the improvement of the macroeconomic environment, as a necessary condition to facilitate the flow of remittances through official channels.