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Political instability and migrants’ remittances into sub-Saharan Africa region

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Abstract

This study uncovers the causal relationship between political instability (constructed using different indicators) and migrants’ remittances on a panel of 22 countries from sub-Saharan African region over the period 1994–2015. Using both the fixed effects and system of Generalised Method of Moments estimation techniques, the following empirical findings are established. First, the theoretical conjecture underpinning the belief in political instability as a factor driving migrants’ remittance inflows receives a clear empirical support. Second, regime instability is found to exert a significant positive impact on migrants’ remittances in the region. Third, remittance is also found to act as a shock-absorbing mechanism to macroeconomic fluctuations in times of political upheavals. Thus, it has been alleged as acting counter cyclically. Fourth, the impacts of other covariates (e.g. like income per head of home and host countries, interest rate differentials and foreign aid) are equally well supported. Last, the less politically volatile countries get more financial assistance from relatives living abroad than high politically volatile countries. On the basis of the foregoing, we suggest the need for government to identify and get to the root causes of the lingering political crises as remittance inflows and/or foreign aid supports cannot completely clear the damages orchestrated by political instability.

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Notes

  1. The boom-bust cycle which escalated into global financial crises was unstoppably occasioned by the sub-prime mortgage lending in the US mortgage market at the later part of 2008.

  2. This financial crisis started in the rich countries and spread to developing countries (Ratha et al. 2008) thus having far-reaching economic implications.

  3. The World Bank’s Global Development Finance (2009) report estimated that net private capital inflows to developing countries fell to $707 billion in 2008(from a peak of $1.2 trillion in 2007) and were expected to fall further by 50 percent by end of 2008 (World Bank 2009).

  4. While foreign direct investment (FDI) and private debt and equity flows witness a decline of around 40%, that of remittance flows only dropped by 6% to the developing countries in 2009 (see Ratha and Silwal 2012).

  5. See Rapoport and Docquier (Rapoport and Docquier 2006) for an excellent survey of various theories on motivations to remit.

  6. The first three indices are indicators associating with regime instability; the fourth index is a violence index; and the fifth index combines both regime instability and violence indicators (Aisen and Veiga 2013).

  7. We compute this test simply to confirm the level of correlation or association between each of the explanatory variables on the right-hand side of the model specified in Eq. (1) and the dependent variable (in our case equals migrants' remittances) on the left-hand side of the same model. This is important as two or more highly correlated variables cannot be simultaneously considered in the same remittance model together, but rather separately.

  8. Indices of political instability used are regime instability index 1 (REGST1), regime instability index 2 (REGST2), regime instability index 3 (REGST3), violence index (VOLDEX) and political instability index (POLINST).

  9. The selection of these set of regressors is in conformity to the standard list of variables as espoused in the empirical literature.

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Authors and Affiliations

  1. Department of Economics, University of Lagos, Lagos, Nigeria

    Kazeem Bello Ajide & Olorunfemi Yasiru Alimi

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  1. Kazeem Bello Ajide
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  2. Olorunfemi Yasiru Alimi
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Correspondence to Olorunfemi Yasiru Alimi.

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Ajide, K.B., Alimi, O.Y. Political instability and migrants’ remittances into sub-Saharan Africa region. GeoJournal 84, 1657–1675 (2019). https://doi.org/10.1007/s10708-018-9942-8

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  • DOI: https://doi.org/10.1007/s10708-018-9942-8

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