THE IMPACT OF REMITTANCES ON ECONOMIC DEVELOPMENT IN THE CENTRAL AND EASTERN EUROPEAN COUNTRIES

Abstract

Emigration flows and their relations with economic development can be observed through different aspects, where one of the important questions is the role of the remittances, and transfer of foreign money to home countries. The objective of this study is to investigate the impact of remittances on economic development in Central and Eastern European countries. A review of previous research on the role of emigration and the impact of remittances on economic development is presented in the first part of the paper. This is followed by panel data analysis. The analysis covers the period after the enlargement of the European Union (EU) in 2004 till the nowadays. The results confirm the positive and statistically significant influence of personal remittances on the economic development of the new EU member states, as well as the positive and statistically significant influence of final consumption, gross fixed capital formation, external trade balance, and foreign direct investments. The positive influence of remittances on economic development should be observed with caution, regarding that remittances are the results of emigration and also are connected with the unfavourable effects of emigration. This study adds to previous research about the significance of remittances in the economies of the new EU member states.