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2013, vol. 18, iss. 4, pp. 495-506
Opportunities for greater remittances' channeling into savings and investments in Serbia
University of Belgrade, Faculty of Economy
Abstract
Remittances represent a dominant and stable inflow of foreign funds for a large number of developing countries - as is the case in Serbia. The recession that hit many countries with the onset of the global crisis reaffirms the perception in the economic literature that remittance flows are much less sensitive to economic cycles and economic shocks than foreign direct investment and other private and public capital flows. Given that remittances are relatively stable cash inflows, developing countries have a number of short-term benefits which are reflected in higher standards of living, and thus increase in current consumption, reduction of poverty and inequality. However, countries could to a greater extent affect the economic growth and development in the long term if they could contribute to a more significant channeling of remittances into savings and investments. Also, despite the fact that remittances significantly reduce the volatility of gross domestic product, generating the possibility for remittance transfer mainly through formal channels - via the banking system and financial markets - would allow the creation of a relatively stable financial system and thus could further accelerate economic growth and development. For Serbia - on the basis of available data and given the relatively underdeveloped financial markets, high private demand and low investment level - we conclude that dominant part of the remittances received is channeled into current consumption and unproductive uses. Therefore, at the end of the paper, we provide recommendations for Serbia whose implementation would lead to more efficient usage of these important funds and greater benefits which are primarily reflected in greater financial stability and more significant contribution to the economic growth of the country in the future.
References
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article language: Serbian
document type: unclassified
published in SCIndeks: 24/03/2014

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