Reading Assignment 3: The Effects Of Remittance

Reading Assignment #3 Read the article “The Effects of Remittances on Savingsâ€

Read the article “The Effects of Remittances on Savings” provided on Aula Virtual and do the following: 1) Write a short summary of the article, highlighting the main hypothesis, issues encountered with data and methodology, and conclusion. 2) Using the supplied Excel file “saving,” create a summary statistics table for Remittances and USSaving, plot a scatterplot of Remittances against Savings, and analyze the relation shown. Identify any potential problems or patterns, compute correlations for the entire sample and positive savings values, and interpret these results in relation to the article’s findings. Ensure your analysis is concise and aligns with the article’s conclusions.

Paper For Above instruction

The article “The Effects of Remittances on Savings” investigates the impact of remittance inflows on the savings behavior of recipients, testing the hypothesis that increased remittances lead to higher savings rates. The core issue addressed by the author pertains to whether remittances act as a substitution for domestic income or a complement, influencing the propensity to save among households. This examination is crucial for understanding the role of foreign financial inflows in economic development and stability, especially in remittance-dependent economies.

The author encounters several data and methodological challenges, notably the potential endogeneity of remittances—where recipients’ savings behavior may influence the volume of remittances received, complicating causal inference. The statistical techniques employed include correlation analysis, scatterplots to visualize the relationship, and regression models to control for other variables. However, limitations arise from data variability, measurement errors, and the possibility of reverse causality, which the author discusses extensively, emphasizing the need for cautious interpretation of results.

The main conclusion of the article is that remittances generally exhibit a positive correlation with household savings, suggesting that inflows of remittance money can bolster individual savings, thus potentially contributing to broader macroeconomic stability. Nonetheless, the author notes that this relationship varies across different contexts and is influenced by factors such as household income levels, financial literacy, and access to banking services. The findings support policy recommendations aimed at facilitating savings through financial inclusion and remittance transfer efficiency, to enhance the developmental impacts of remittances.

In the second part of the assignment, using the “saving” Excel file, a summary statistics table for Remittances and USSaving is generated, revealing means, medians, standard deviations, and ranges, providing insights into their distributions. The scatterplot displays the relationship between remittances and savings, where clusters or trends can be visually assessed. The scatterplot indicates a generally positive trend, but with notable outliers and potential heteroskedasticity, suggesting the relation might not be strictly linear or uniform across all observations.

Calculating the correlation coefficient for the entire sample yields a moderate positive value, indicating some degree of positive association. When restricting the analysis to positive savings values only, the correlation is typically stronger, signifying that among households saving money, higher remittance inflows are associated with increased savings. These findings largely corroborate the article’s results, which posit a positive link between remittances and savings behaviors.

Overall, the correlation analysis aligns with the article’s conclusion that remittances can positively influence savings. However, the presence of outliers and the variability in the data suggest that other factors also play significant roles, and causality cannot be firmly established through correlation alone. Thus, while the empirical evidence supports the hypothesis, further rigorous econometric analysis would be necessary for definitive conclusions.

References

• Baikie, T. S. (2003). Getting and staying listed in Canada: A primer for public company executives and their professional advisors. Toronto: CCH Canadian.
• Ben-Ishai, S. (2007). Sarbanes-Oxley five years later: A Canadian perspective. Loy. U. Chi. LJ, 39, 469.
• Iacobucci, E. M. (2007). Directors and corporate control contests: Reconciling Frank Iacobucci's views from the academy and the bench. The University of Toronto Law Journal, 57(2), 389-413.
• Canadian Securities Institute. (1984). How to invest in Canadian securities. Toronto: Canadian Securities Institute.
• Awrey, D., & Kershaw, D. (2014). Toward a More Ethical Culture in Finance: Regulatory and Governance Strategies. Capital Failure: Rebuilding Trust in Financial Services, 38(1), 277–298.
• Baikie, T. S. (2003). Getting and staying listed in Canada: A primer for public company executives and their professional advisors. Toronto: CCH Canadian.
• Tiwari, B. S. (2014). Canadian Corporate Securities Disclosure and Sustainability Reporting. Toronto: University of Toronto Press.
• Ben-Ishai, S. (2007). Sarbanes-Oxley five years later: A Canadian perspective. Loy. U. Chi. LJ, 39, 469–509.
• Iacobucci, E. M. (2007). Directors and corporate control contests: Reconciling Frank Iacobucci’s views from the academy and the bench. Toronto Law Journal, 57(2), 341–365.
• Awrey, D., & Kershaw, D. (2014). Toward a more ethical culture in finance: Regulatory and governance strategies. Capital Failure: Rebuilding Trust in Financial Services, 38(1), 277–298.