Climate Change, Macroeconomic Sensitivity And The Response of Remittances To The North African Countries: A Panel VAR Analysis

Abstract

The paper analyses the role of remittances in alleviating the Gross domestic product (GDP) oscillations induced by a climate shock that is detected by irregular precipitation and annual temperature in the North African region between 1980 and 2016. By controlling endogeneity problems, we use the Panel Vector Autoregressive model (PVAR). Our results show on the one hand that the decline in precipitation and the increase in temperature have adverse consequences on the GDP per capita. On the other hand, remittances are a pathway of action towards macroeconomic stability of the most vulnerable countries to climate change. They are characterized by counter-cyclical patterns which increase the capacity of adaptation to meteorological changes in the recipient countries and also resistance to hazards. Therefore, the future policies must be more rigorously focused on adaptation policies and investing in green technologies that mitigate the long term negative consequences of climate transformations.