The impact of remittances on household savings in the Baltics

  • Received June 20, 2020;
    Accepted March 16, 2021;
    Published March 23, 2021
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  • Article Info
    Volume 18 2021, Issue #1, pp. 335-345
  • Cited by
    5 articles

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This work is licensed under a Creative Commons Attribution 4.0 International License

Proper understanding and monitoring of household savings are crucial to effective macroeconomic policies targeted at balanced and sustainable economic growth. Remittances, as a financial flow of foreign capital, can create a vital part of private savings. This paper is aimed at identifying whether remittances contribute to household savings in the Baltics along with other macroeconomic variables in a post-crisis period, during which the relative smoothing and convergence of economic development of the Baltic countries after the sharp financial distress in 2009 can be observed. The following methods of panel data regression analysis were employed: fixed effects and OLS. The results of the econometric analysis based on both fixed effects and OLS methods reveal that remittances are an essential driver of savings in the Baltics in the long run. Savings in the Baltics are not significantly influenced in the short term by sharp economic fluctuations, but are dependent on demographic factors and foreign capital, which can bring instability in economic development and financial flows of the region.

This research was funded by Vega research project no. 1/0037/20: “New challenges and solutions for employment growth in changing socio-economic conditions”, and VEGA research project no. 1/0287/19 “Integration of immigrants in EU countries from the point of view of migration policies”.

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    • Figure 1. GDP growth rate: volume percentage change on the previous year in the Baltics and EU28, %
    • Figure 2. Population dynamics in the Baltics and EU28, thousands
    • Figure 3. The household saving rate in the Baltics, % of disposable income
    • Table 1. Description of variables
    • Table 2. Summary statistics
    • Table 3. Regression results
    • Table 4. Collinearity test: variance inflation factors
    • Table 5. Test for differing group intercepts, heteroscedasticity test, error distribution test
    • Conceptualization
      Andrej Přívara, Karol Trnovský
    • Data curation
      Andrej Přívara, Karol Trnovský
    • Formal Analysis
      Andrej Přívara, Karol Trnovský
    • Funding acquisition
      Andrej Přívara, Karol Trnovský
    • Investigation
      Andrej Přívara, Karol Trnovský
    • Methodology
      Andrej Přívara, Karol Trnovský
    • Project administration
      Andrej Přívara, Karol Trnovský
    • Resources
      Andrej Přívara, Karol Trnovský
    • Software
      Andrej Přívara, Karol Trnovský
    • Supervision
      Andrej Přívara, Karol Trnovský
    • Validation
      Andrej Přívara, Karol Trnovský
    • Visualization
      Andrej Přívara, Karol Trnovský
    • Writing – original draft
      Andrej Přívara, Karol Trnovský
    • Writing – review & editing
      Andrej Přívara, Karol Trnovský