Question

Short answer question.

Evaluate this statement "Remittances have played a central role in reducing poverty and promoting growth in developing economies."

Answer 1

Remittances are transfers of money across national boundaries by migrant workers.Remittance flows have grown in the world economy over the longer-term as the scale of migration between countries has grown.Some countries are heavily reliant on remittances, for example, half of all Tongans work abroad, and many send money back home.

Western Union and MoneyGram dominate the money transfer industry and the high level of fees that these companies has been heavily criticized in recent years

Following are some advantages of Remittances

• Money from remittances goes directly to families - with less risk of waste or corruption - more effective than overseas aid.
• Remittances provide a key source of foreign savings for low income countries - Remittances are the biggest source of US dollar income for Mexico second only to oil exports.
• High Remittances are very good for financial markets as this help to increase liquidity which may push down the interest rate and lead to an expansion of credit and investment
• Most of income from remittances is consumed. This helps in increasing Aggregate Demand. With the help of multiplier effect this can multiply the economic growth.
• The income from Remittances help in funding of start ups which further result in the economic development of a country.