Trickle Down Economics: Remittances: Economist

Migrants are less fickle sources of cash than foreign creditors

QUEUES of migrant workers waiting to send money to their families hardly present globalisation at its most glamorous. But such remittances made up more than a fifth of the GDP of some countries such as Jamaica, Jordan, Lebanon, Moldova and Tajikistan in 2007.

Data compiled by researchers at the World Bank suggest that remittances may have another virtue that is less widely appreciated. Although they are likely to fall as a result of the slumping world economy, they may be less fickle than more publicised private-capital flows, such as equity and lending by foreign banks.

Private-capital flows have plunged in the past year, and are continuing to fall. The Institute of International Finance (IIF), a global banking body, reckons that net private-capital inflows into emerging economies fell from $929 billion in 2007 to $466 billion in 2008, a drop of nearly 50%. And 2009 will see only $165 billion flow to emerging economies, according to the IIF.

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