“Despite the challenges brought about by the pandemic, remittances remained resilient. Based on the results from the model simulated for our first objective, it showed that remittances actually cushion GDP, consumption, and national savings in hard times. Literature also showed how Filipinos send more money in times of distress to help households cope.”
The authors used GDP as the measure of economic growth, while the explanatory variables are remittances, financial inclusion index, the interaction between the two, and control variables such as inflation, electricity, trade, human capital, government expenditure, and institutional quality.
The previous observation points out that economic fluctuations impact how households allocate the remittances received. It was generally observed that households spend more during good times and spend less on bad times to prioritize spending on essential needs.
Remittances have indeed proven that it cushions GDP, household spending, and national savings during economic downturns. Cash remittances lessen volatility in GDP, while non-cash remittances have a negative effect on GDP not necessarily because they lower the GDP, but rather because they do not get captured in the national income accounts right away as they enter the country apart from banks. They tend to go straight to households, through pera padala (which can now be received through GCash free of charge) or through in-kind remittances such as goods from balikbayan boxes. In effect, money sent through pera padala that can be received through GCash saves time for the households because they no longer need to line up in branches especially in times like the pandemic where it is risky to go to public places.
… Non-cash remittances or goods such as money sent through pera padala or in-kind goods through balikbayan boxes help them save money. Cash remittances, on the other, hand, help smoothen household consumption. This behavior gives us a qualitative explanation of the countercyclicality of remittances. This means that OFWs send more remittances, in cash or in kind, during economic downturns.
“OFW REMITTANCES, THE MACROECONOMY AND COVID-19,” the paper written by Dr. Jovi Dacanay, the Chairholder of the CRC Professorial Chair for Migration and Overseas Work, along with Ms. Viory Janeo, Mr. Anton Raphael Mutuc and Ms. Aleckzandra Rubia, highlights the important correlation between the OFWs’ behavior in terms of remittances and the country’s GDP. The study shows both the direct and indirect impact of Covid-19 when it comes to the OFWs’ spending and saving habits which are affected by factors such as changes in spending habits, household consumption and national savings. As a result, the researchers were able to prove that non-cash remittances, or those sent via pera padala has opened a way for Filipino families to save, while cash remittances in turn are used for household necessities.
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