Deposit insurance, remittances, and dollarization: Survey‐based evidence from a top remittance‐receiving country

Abstract

The study uses a unique survey of remittance‐receiving individuals from Tajikistan to study the impact of policy awareness on consumer behavior. The results show that knowledge of deposit insurance encourages the use of formal channels for transmitting remittances and reduces dollarization. Given the size and importance of remittances in Tajikistan, improving financial literacy and better publicizing details of the social safety net may encourage a more frequent use of formal channels for transferring remittances and reduce reliance on foreign exchange for transaction purposes. This is likely to improve bank profitability, enhance financial stability, and improve access to finance.

Establishing the Relationship between Financial Hardship and Remittance Inflow in Nepal

“…Remittances enhance household welfare through either consumption smoothing or in a sustainable way through investment (Ajaero et al, 2018;Kangmennaang et al, 2018). Besides, remittances act as insurance for recipients when they are experiencing some sort of economic shock, increasing when recipient income falls (Yang & Choi, 2007;Grigorian & Kryshko, 2019). Evidence from Bangladesh also suggests that the welfare impacts are higher for international remittances than domestic ones (Wadood & Hossain, 2017;Kamal & Rana, 2019).…”

Analyzing the impact of workers’ remittances on household consumption in Latin American and Caribbean Countries

“…There are several factors that have positively impacted remittance flows: and (i) increased immigration to developed countries; (ii) international agreement to decrease the cost of transferring remittance, 6 (iii) high oil prices once generated an increase in remittance flows from Russia to Central Asia, and from the Gulf region to South and Southeast Asia, and (iv) currency changes and inflation rates in some recipient countries. Many studies note financial markets reform as an incentive for sending remittances; Grigorian and Kryshko (2017) mention that the availability of deposit insurance encourages the use of formal channels for transmitting remittances. The impact of the global financial crisis varies from region to region depending on the regional diversification of the sources of remittances (IMF 2009).…”

“…The impact of remittance flows on the economy of recipient countries continues to stimulate current research, for example, Grigorian and Kryshko (2017), Barajas et al (2009), Fajnzylber and, and Goldberg and Levi (2008). 1 Recent studies focus on several issues: (i) Gabriela-Mundaca (2009) on economic growth, (ii) UNCTAD (2011) and Adams and Page (2005) on the poverty level (iii) Aggarwal and Demirguc-Kunt (2006) on financial sector development, (iv) Lueth and Ruiz-Arranz (2006) on the determinants of flows, (v) Neagu and Schiff (2009) on the stability, cyclicality and stabilizing impact, and (vi) Yang (2006) and Yang and Choi (2007) on consumption smoothing.…”

Digital Money Across Borders

“…For a survey of the literature seeGiovannini and Turtelboom (1992). Currency substitution also entails a loss of seigniorage revenues and reduced the ability of the central bank to act as lender of last resort.12 A similar widening of the role of the foreign currency has been observed in cases where personal remittances underpinned foreign currency availability, such as El Salvador and Tajikistan(Ventura, 2012;Grigorian and Kryshko, 2019).©International Monetary Fund. Not for Redistribution…”