Former Yugoslav Republic of Macedonia: Selected Issues
IMF Staff Country Reports, July 25, 2014
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- Former Yugoslav Republic of Macedonia: Selected Issues
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Bibliographic details
- Published: July 25, 2014
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781498376150.002
Summary of purpose and scope
- Investigates the macroeconomic impact of remittances on long-run external sustainability and growth in the Former Yugoslav Republic (FYR) of Macedonia.
- Presents stylized facts on remittance characteristics in Macedonia, emphasizing:
- Countercyclicality of remittances.
- Importance of remittances in sustaining the purchasing power of domestic agents.
- Reviews theoretical framework for assessing macroeconomic impact, highlighting the possible risk of “Dutch disease” developments.
- Uses a Bayesian vector autoregression (BVAR) model to empirically investigate:
- The hypothesis of remittance countercyclicality.
- The hypothesis of Dutch disease effects.
Key findings from the paper
- Remittances in Macedonia are countercyclical.
- Remittances play an important role in sustaining the purchasing power of domestic agents.
- There is a possible risk of “Dutch disease” developments associated with remittance inflows.
- Empirical investigation employs a BVAR model to test competing hypotheses about remittance effects.
- Political engagement and mobilization of diaspora savings are highlighted as ways to maximize long-term benefits.
Policy recommendations and implications
- Explore policy options to better harness remittances to support investment and long-term growth.
- Strong political engagement in support of diaspora projects is identified as a key point.
- Mobilization of diaspora savings for private and public investment would maximize the long-term benefits of remittances.
Methodology
- Empirical analysis based on a Bayesian vector autoregression (BVAR) model to assess:
- Countercyclicality of remittances.
- Potential Dutch disease effects on the economy.
Subject areas and keywords (as listed)
- Subject: Balance of payments, Bonds, Consumption, Financial institutions, Foreign exchange, Migration, Outward remittances, Population and demographics, Real exchange rates, Remittances
- Keywords: bond feature, Bonds, central bank, CR, excess demand, exchange rate, exogenous remittance, financing, foreign currency, FYR Macedonia, GDP, interest rate, ISCR, Macedonia, Migration, Outward remittances, Real exchange rates, remittance, remittance shock, remittance transfer, Remittances, small business, Western Europe, workers' remittance