Assessing the vulnerability of remittance networks to geopolitical shocks in countries of the former USSR: An econometric analysis.

Remittances are an important source of cash flows for lower-middle income countries, but may also enhance vulnerability to shocks if these financial flows are concentrated among a few sources. We utilize descriptive statistics and panel econometric models estimated via generalized least squares (GLS) to investigate whether remittances are a source of vulnerability for the newly independent states (NIS) arising from the dissolution of the former Soviet Union, who receive a substantial proportion of remittance flows from the Russian Federation. Analytical results reveal remittance inflows from the Russian Federation to the NIS, are more significant than remittance inflows from the Russian Federation to all other countries. Model results also indicate remittances to the NIS are more susceptible to geopolitical and economic shocks affecting the Russian Federation than are remittance inflows to other countries. From a policy perspective, our results suggest policymakers should strive to eliminate barriers to migration between countries to reduce the likelihood of concentrated financial flows, since concentrated remittances sources represent potential exposure to economic and geopolitical shocks of sending countries. [Display omitted] • Investigate remittance network vulnerability when inflows are undiversified. • Focus analysis on newly independent states (NIS) from dissolution of Soviet Union. • Remittances do not enhance economic vitality of NIS relative to other countries. • NIS remittances from the Russian Federation more significant than other countries. • NIS remittances more susceptible to shocks to Russian Federation than other countries. [ABSTRACT FROM AUTHOR]