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Global Response Essay

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2014
SUBJECT: GLOBAL REMITTANCES
The International Monetary Fund (IMF) defines remittances as international transfers of funds sent by migrant workers from the country where they are working (source country) to people, typically their family members, in the country from which they originated (receiving country).
Remittances represent household income from foreign economies arising mainly from the temporary or permanent movement of people to those economies. Remittances are mainly derived from two items in the balance of payments framework: income earned by workers in economies where they are not resident (or from nonresident employers) and transfers from residents of one economy to residents of another.

1. Where are remittances …show more content…

Remittances are more evenly distributed among developing countries than capital flows. In fact, remittances are especially important for low-income countries. Remittance flows to low-income countries are nearly 6 percent of their gross domestic product (GDP), compared with about 2 percent of GDP for middle-income countries .
Remittances can generate output growth either by increasing consumption or by increasing investment. According to writers such as Stahl and Arnold, in this context, the positive multiplier effects of remittances may well promote growth, as, for instance, when remittances are used to purchase domestically produced goods and services. On the other hand, large remittance inflows, like any other foreign currency inflows, can cause an appreciation of the real exchange rate and raise the price of traditional exports, while making imports more expensive, and this rings true for smaller economies.
3. Why is the cost of remittances the subject of such intense international scrutiny?

Remittances wired from first world countries by migrants provide an important source of income for families in developing countries. Remittance cost has been the focus of intense international scrutiny primarily because the Global Remittances Working Group, which was established in 2009 and coordinated by the World Bank, realized that excessive remittance charges imposed on these transactional transfers border on exploitive. This prompted G8 countries to start an

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