The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
This paper adds international migration and remittances into the IMF's Flexible System of
Global Models (FSGM). FSGM is a global general equilibrium model with endogenous
primary commodity markets. A method to estimate the structural dynamics of major remitter
regions is proposed. The dynamics of remittances and migration in FSGM are calibrated to
be consistent with the main stylized facts of the empirical estimates. Structural disturbances
pertinent to current global remittance flows are examined. These disturbances include
disruptions to oil supply, output variation in Europe and the United States, labor
nationalization policies in Saudi Arabia, and a global reduction in the cost to remit. The
multilateral framework illustrates how remittance inflows need not originate from the region
with the underlying economic disturbance but can arise from third party remitter regions
affected by global commodity markets. The results also illustrate that the correlation of
remittance inflows and the real GDP of labor-exporting economies can be either positively or
negatively correlated. The evidence suggests that the behavioral incentive to migrate and
remit cannot be deduced from correlations of real GDP and remittance inflows.