What Explains Remittance Fees? Panel Evidence

By Thorsten Beck, Mathilde Janfils, Kangni R Kpodar

April 1, 2022

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Thorsten Beck, Mathilde Janfils, and Kangni R Kpodar. What Explains Remittance Fees? Panel Evidence, (USA: International Monetary Fund, 2022) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper uses data across 365 corridors to document time and country variation in remittance fees and explore factors predicting variation in remittance fees. We document a general reduction in such fees over the past decade although the goal of fees below 3 percent has not been met yet in many corridors. We identify both cost- and risk-based constraints and market structure as barriers to lower remittance fees. Higher transaction costs as result of a more rural population in the sending country and lower scale are associated with higher remittance fees. However, lower risks due to the stability of fixed exchange rates and Internet rather than cash payment are associated with lower remittance fees. Finally, remittance corridors dominated by banks and few players are characterized by higher fees.

Subject: Balance of payments, Capital controls, Exchange rate arrangements, Foreign exchange, International trade, Plurilateral trade, Population and demographics, Remittances

Keywords: A. remittance, Access to financial services, Capital controls, Exchange rate arrangements, Global, Migration, Panel evidence, Plurilateral trade, Remittance corridor, Remittance cost, Remittance fee, Remittances

Publication Details

Pages:

37
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2022/063
Stock No:

WPIEA2022063
ISBN:

9798400205439
ISSN:

1018-5941

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