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The response of remittances inflows to asymmetric oil price shocks in Egypt

Zahran, M. S. A. Z. (2019). The response of remittances inflows to asymmetric oil price shocks in Egypt. Review of Economics and Political Science, 8(6), pp. 520-539. doi: 10.1108/reps-01-2019-0009


The purpose of this paper is to explore and analyse the dynamic relationship between remittances inflows of Egyptians working abroad and asymmetric oil price shocks.

This study uses a vector autoregressive (VAR) model to explain the impulse response functions (IRFs) and the forecast error variance decomposition (FEVD). The rationale behind using these tools is its ability to examine the dynamic effects of our variables of interest.

The impulse response functions confirmed that remittance inflows have various responses to asymmetric oil price shocks. For instance, inflowing remittances increase in response to positive oil price shocks, while it decreases in response to negative oil price shocks. Also, the results indicate that the responses are significant in the short and medium-run and insignificant in the long run. The magnitude of these responses reaches its peak or trough in the third year. Further, the variance decomposition reveals that oil price decreases are more influential than oil price increases.

This means that remittances inflows in Egypt are pro-cyclical with oil price shocks. That explained by the fact that more than one-half of those remittances sent from GCC countries where real economic growth is very pro-cyclical with the oil prices. This empirical assessment will help policymakers to determine the behaviour of remittances and highlights the impact of different kinds of oil prices shocks on remittances. Unlike the little existing literature, this study is the first study applied the VAR model using a novel dataset spanning 1960-2016.

Publication Type: Article
Additional Information: Copyright © 2019, Mohamed Samir Abdalla Zahran.
Publisher Keywords: Remittances, Oil price shocks, Egypt, VAR modelling
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
Departments: School of Policy & Global Affairs > Economics
SWORD Depositor:
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