Remittance flows are projected to continue their upward climb over the medium term. This paper examines the potential of remittances to act as a stabilizer during periods of macroeconomic volatility and smooth consumption over time. The results show that remittances are less volatile than other foreign currency flows and do not commove with business cycle fluctuations. They are relatively stable even during episodes of sharp macroeconomic volatility, including sudden stops and financial crises. We show that remittances are associated with better consumption smoothing outcomes, suggesting that they can help support consumption stability over time.
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