OFW Remittances, the Macroeconomy and COVID-19

Janeo, Viory Yvonne T.1, Dacanay, Jovi C.2. Mutuc, Anton Raphael3, Rubia, Aleckzandra 3
1 Vice Dean, School of Economics, University of Asia and the Pacific
2 Assistant Professor and Doctoral Program Director, School of Economics, University of Asia and the Pacific
3 Graduate Staff, School of Economics, University of Asia and the Pacific

東南アジアでは海外出稼ぎ労働者からの送金が国のGDPに占める割合を無視できない。しかしCOVID-19の蔓延で世界的に経済活動が停滞した。このことが出稼ぎ労働者からの送金にどのような影響を及ぼしたかを検証した。

Abstract

The study evaluates the relationship between remittances and the country’s GDP, as well as its effects on household
consumption and national savings. Moreover, the COVID-19 pandemic served as the external shock which hampered the growth of economies around the world, therefore, this paper also hopes to shed light on the effects of thepandemic on remittances and its relationship with households and the GDP. To achieve these objectives, the authors
formulated a framework/model based on a study on the necessity of financial inclusion for enhancing the economic
impacts of remittances. Using an exponential generalized autoregressive conditional heteroskedastic (EGARCH)
regression procedure, the study will be able to show how remittances act as a leverage during hard times. Basedon the results of this study, as one of the largest countries with overseas workers, remittances cushion thePhilippine economy during hard times, especially during the pandemic. The study hopes to shed light on the benefits
remittances have on the GDP, household spending, national savings, and the COVID-19 pandemic. This paper aims
to answer the following question: What is the impact of remittances on the macroeconomy and households? The
study aims to answer its main question by analyzing the following objectives: First, to identify the relationshipbetween Overseas Filipino Workers (OFW) remittances with macroeconomic variables, and second, to identify the
impact of the COVID-19 pandemic on remittances. Despite the challenges brought about by the pandemic, remittances remained resilient. Based on the results from the model simulated for our first objective, it showed that
remittances cushion GDP, household consumption, and national savings in hard times.
Keywords

Remittances, EGARCH, volatility, consumption smoothing

Introduction

The outbreak of COVID-19 globally forced nations
to close their respective borders in hopes to contain thevirus. This has caused the entire world economy toslump, more so hitting the developing countries. With
the closure of borders, people were restricted from traveling not only locally but also internationally. With that,
local sectors across the globe were hit severely. As of
March 16, 2021, the cumulative number of cases worldwide has hit more than 121 million. Health systems
around the world were overwhelmed by the pandemic

that even the developed countries struggled. Meanwhile,
in developing countries, access to relevant supplies suchas face masks, COVID-19 swab tests, and hospital
equipment were limited that it led to faster rates ofincrease in cases as well as deaths. Poor government
handling also made the situation worse for many developing countries. In the Philippines, it was only on the
15th of March 2020 that the Philippine government
decided to put the county under the Enhanced
Community Quarantine (ECQ), wherein the country is
put into lockdown.

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For a country like the Philippines, whose overseas
workers account to 2.2 million in population, the left
and right imposition of travel bans affected not only theoverall economy but also Filipino households. The shutdown of almost all economies across the globe forced
Filipinos working abroad to not have income (be it
because of being laid off or reduced salaries), thus, notbe able to send money to their families in the Philippines.
In the 2019 Survey on Overseas Filipinos, 96.8% of the
2.2 million OFWs who worked abroad from April to
September 2019 were Overseas Contract workers(OCWs), while 3.2% worked abroad without contract.
By the end 2020, the Department of Foreign Affairs(DFA) reported a total of 327,511 repatriated OFWs.
70.7% (231,537) of which were land-based repatriatescoming from at least 90 countries around the world. The
remaining 29.3% (95,974) of which were seafarers fromcruise ships, oil tankers, and other bulk vessels. Withthe uncertainty brought about by the pandemic, a lot of
people and OFWs lost their jobs. A month after theimposition of lockdown in most countries across theglobe, personal remittances in April 2020 continued topour even reaching $2.3 billion. Its year-to-date levelstood at $10.5 billion, which is a slight dip of 2.9% ($10.8
billion) from the same period in the previous year
(January-April 2019). Similarly, cash remittances
coursed through banks declined by 16.2% to $4 billion
in April 2020 due to the repatriation of some OFWs in
countries heavily affected by the pandemic. With that,the economy expected remittances to fall, which would
massively affect the country’s GDP. Based on research,however, OFW remittances stood still and proved the
projections wrong. The authors hope to shed light on thebenefits remittances have on the GDP, household spending, national savings, and the COVID-19 pandemic.
This study will show through the results of the structural EGARCH that although leverage still has an effectdue to the vulnerability of the country, remittances, thatis, cash and non-cash (money that is not sent through abank, and can also be clothing, food, and other necessities), act as a cushion on the vulnerability of GDP fromexchange rate fluctuations and external shocks such as
oil price hikes. These are factors which contribute to the164volatility of GDP and GDP growth.
This paper aims to answer the following question:
What is the impact of remittances on macroeconomy
and households? The study aims to answer its mainquestion by analyzing the following objectives. First, toidentify the relationship between OFW remittances withmacroeconomic variables. Second, to identify the
impact of the COVID-19 pandemic on remittances.
The authors focused on the expenditure side of the
National Income Accounts of the Philippines: household
final consumption expenditure (HFCE), government final
consumption expenditure (GFCE), and the gross capitalformation (GCF) as other explanatory variables to determine the relationship of remittances with the country’sGDP. Moreover, the remittances used in this study are
specifically focused on cash remittances as these are theones that course through banks (non-cash remittances arestill going to be tackled a bit). Data from the Consumption
Expectations Survey (CES) specifically for the classification of remittance utilization, conducted by the Philippine
Statistics Authority (PSA) in collaboration with the
Bangko Sentral ng Pilipinas (BSP) will also be used togauge the spending allocations of OFW households priorand during the pandemic.

Literature Review

People migrate due to the presence of demographic
asymmetries between countries, which can serve as
incentives for people to be mobile. People in developing
countries such as the Philippines will push to seek jobs
or opportunities abroad due to poor economic performance along with the abundant labour population.
Remittances and the Macroeconomy. Abdon et al.
(2007) said that remittances affect consumption patterns in two ways as they might be treated as either transitory or permanent income. Transitory means thatmoney will be used for housing, housing repairs, andaccumulating durables. Permanent income, on the other
hand, means that the money received will be used forbasic consumption such as food expenditure. Utilizationof remittances also depends on conditions. In a bad year,
remittances might be used for consumption of basic

6th AFC Best Papers (2022)

needs such as food expenditures, while consumption ofdurable goods might be more preferred in a good year.
Basu and Rajan (2018) said that remittances are spent
mostly on consumption and less on investment.
Chikanda and Tevera (2009) concluded a positive relationship between remittances and household savingsand expenditures as it stabilized impoverished areas inZimbabwe. Adams and Cuecuecha (2010) analyzed thathouseholds receiving remittances in Indonesia tend to
spend their remittances on consumption rather thaninvestment goods. Dhakal (2012) examined the positive
relationship between remittances with household savings and expenditures in rural areas of Nepal.
Kakhkharov (2018) discovered that remittances associated with livelihoods such as family businesses are supplemented with sufficient savings and investment. Akter(2018) continues to suggest that government policy
should focus on leveraging remittance flows to facilitatesavings and investment for capital accumulation indeveloping countries.
Privara and Trnovsky (2020) studied the impact ofremittances on household savings in the Baltics. The
authors claimed that households that receive remittances
spend more on health, education, and housing in comparison to those who do not. They identified the main issueof the limited allocation on investments as households
spend more on consumption. The model used in the study
included remittances as a contributing factor to the household savings in the Baltics along with macroeconomic
variables such as unemployment rate, inflation, FDI
inflows, and government debt. In addition, demographic
variables such as life expectancy, old-age dependency,
and introduction of National Strategy Financial Education
as a proxy for financial literacy. The results of fixed
effects and OLS methods revealed that remittances are an
essential driver of savings in the Baltics. The fixed effectestimation showed that inflation and unemployment
appeared to be insignificant factors of savings, while the
OLS estimation showed that government debt and unemployment influence savings.
Benhamou and Cassin (2020) developed an
Overlapping Generations (OLG) model to explain theprocess of the interplay between economic growth andinvestment in human and physical capital in small island
economies. The results brought out the role of migration
to explain the choices of parents in terms of educationand savings, knowing that intergenerational transfers
are included in the budget constraint. An increase ineducation spending or investment in physical capital areat the expense of savings. This will have high return inhuman capital which is why families rather spend moreon human capital such as education as this will havehigher cumulative incentives in the future. The downside, however, is that there will be minimal allocation
for savings.
Chami et al. (2012) did an empirical investigation
into the issue of whether the size of remittance flows is
an important determinant of growth volatility. The
authors wanted to determine whether the ratio of remittance receipts to GDP helps to explain the volatility ofgrowth in 70 economies (16 of which are advanced and
54 are developing) after controlling for a large numberof variables that have been cited as potential determinants of such volatility. OLS and Generalized Method ofMoments (GMM) panel regressions were used to explain
the standard deviation of real per capita GDP growth fora sample of 70 countries. The results of the study showedthat remittance inflow has tended to be stabilizing on
average, which means that it indeed reduces volatility of
GDP growth in remittance-receiving countries, evenafter controlling for a large number of other potential
determinants of growth volatility. Chuc et al. (2020)
investigated the combined impact of international remittance inflows and financial inclusion on economic
growth using a sample of 60 low and middle income
countries over 1996-2017. The authors focused on theeffect of inclusiveness on a financial system, which they
hypothesized to strengthen the growth-boosting effectof remittances. According to their main regression
results, the coefficient on the interaction terms of remittances with financial inclusion index is positive, whichindicates that under a more financially inclusive financial system, the developmental benefits associated withremittances tend to increase. In addition, the coefficienton the interaction between remittances and availability
being insignificant reveals that the availability of165

Viory Yvonne Janeo T., et al.

financial products is not important for materializing the
growth-enhancing impact of remittances.
ADB and World Bank (2018) claimed that remittances finance consumption needs and have the potential to counterbalance adverse effects during economic
downturns and sudden stops in capital flows.
Remittances are therefore countercyclical, which meansthat they can mitigate macroeconomic volatility.
Focusing on the behaviour of remittances during periods of large macroeconomic shocks, results showed that
remittances remained resilient. Figure 1 shows thatduring the financial crisis in 2008, while a plethora ofsudden stops in capital inflows were experienced, remittances showed less fluctuations or sudden stops.
Similarly, during other crises apart from the 2008 financial crisis, remittances behave the same.

Figure 1. Remittances and Capital Inflows during Sudden
Stops (Index numbers)
Source:	Migration and Remittances for Development in Asia, ADB andWorld Bank (2018)

COVID-19 on Remittances. The World Bank (2020)
reported that remittance flows to low and middle-income countries were projected to fall by 7.0% to $508
billion in 2020 and decline further to 7.5% to $470 billion in 2021. China and the Philippines are the top recipients in the East Asia and pacific region, which was
projected to fall by 11.0% to $131.0 billion in 2020 due
to the adverse impact of the pandemic. Murakami &Shimizutani (2020) explored the potential impacts of
the COVID-19 pandemic on the welfare of remittance-dependent households in the Philippines with theprediction that that remittance inflow will decrease andhousehold spending per capita will decline during the
COVID-19 pandemic. As economies worldwide opened
up once again by the 3rd quarter in 2020, OFW remittances was 7.6% higher to $3.085 billion in July 2020

166

$2.867 billion in the same month in the previous year.
Remittances, however, declined once again in August
due to the revert of the country to a stricter quarantine
measure (MECQ), but once again bounced back by a
9.1% increase year-on-year to $2.9 billion in September.
Bayangos & Jansen (2010) said that when economic
times in a household are hard, overseas workers are
more likely to send money and then compensate whentimes are good. Personal remittances from Overseas
Filipinos (OFs) fell by 0.3% year-on-year to $3.205 billion in December 2020 from $3.216 billion in December
2019. The 0.7% decline in remittances sent by landbased workers with work contracts of one year or more
to $2.494 billion-$2.513 billion in December 2020 contributed to the decrease in personal remittances. For thefull year 2020, personal remittances from OFs reached$33.194 billion (0.8% lower than the $33.467 billion
recorded in 2019). Personal remittances in 2020 represented 9.2% of the country’s GDP and 8.5% of the country’s GNI, making it the major source of foreignexchange inflows.

Theoretical Framework

In order to attain the objectives of this paper, theauthors revised the framework based on Chuc et al’s
(2020) study on the necessity of financial inclusion forenhancing the economic impacts of remittances. In theirstudy, the authors used GDP as the measure of economic
growth, while the explanatory variables are remittances,financial inclusion index, the interaction between thetwo, and control variables such as inflation, electricity,
trade, human capital, government expenditure, andinstitutional quality. In this research, the structural
exponential generalized autoregressive conditional heteroskedastic (EGARCH), by Nelson & Cao (1991), wasused to determine and explain the relationship between
remittances and macroeconomic variables such as: final
household consumption expenditure (HFCE), final government expenditures (GFCE), and the gross capital formation (GKF) using the country’s GDP per quarter from2000 to 2020 as the dependent variable. The exponential
generalized autoregressive conditional heteroskedastic(EGARCH) model was chosen by the authors in order to6th AFC Best Papers (2022)

measure the effect of remittances on the volatility, as
well as the capacity of remittances to be used as a leverage on the dependent variables, namely, GDP, GDP
growth, household consumption and national savings. A
positive relationship for leverage on the dependent variable would denote that a positive return on investments
can be obtained if the Philippine economy would have aconstant flow of remittances. This result goes hand inhand with a negative effect of volatility. Negative volatility has a double significance: that remittances arecounter-cyclical and that volatility clustering happens
when remittances form part of the country’s income
stream. For the second objective, descriptive data fromthe Bangko Sentral ng Pilipinas shall be used to examine consumption behavior, with the use of expected consumption indicators.

Conceptual Framework

Figure 2 below shows the conceptual framework of
the researchers. The authors derived the framework of
the study from modifying Benhamou and Cassin’s(2020) model on the empirical impact of remittances on
domestic savings, Privara et al’s (2020) frameworkassessing the impact of remittances to household savings in the Baltics, and Chuc et al’s (2020) model on thegrowth boosting effect of remittances to GDP.
The derived framework incorporates factors and thevariables from the studies addresses the objectives ofstudy with the integration of EGARCH. The first objective is represented by the relationship between

remittances and macroeconomic variables such as GDP,
HFCE, and National Savings as dependent variables.
The second objective, on the other hand, is represented
by the effects of remittances on COVID-19 GDP andhousehold consumption.

Empirical Methodology

Quarterly data from 2000 to 2021 shall be used forthe estimation procedure. The estimator for output is thecountry’s GDP with explanatory variables such as
remittances (cash and non-cash), household final consumption expenditure (HFCE), government final consumption expenditure (GFCE), and gross capitalformation (GKF). The explanatory variables are
expected to have a positive effect to GDP and GDP
growth. Due to the assumption that remittances are used
to smoothen consumption, the authors will apply the
regression procedure across the entire time period,
2000Q1 to 2021Q4. Table 1 shows the definitions of thevariables that the researchers used. As mentioned above,
the authors modified Chuc, et al’s literature model to fit
our objective to determine the relationship between
remittances and other macroeconomic variables as well
Table 1. Variable Definitions

Figure 2. Conceptual Framework)
Source: Authors’ Theoretical Framework

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Viory Yvonne Janeo T., et al.

as the effect of remittances on the consumption ofhouseholds.
Objective 1: The relationship between remittancesand macroeconomic variables
This objective will be tested with the following
hypothesis: Remittances smoothen consumption. Dueto the expected counter-cyclicality of remittances tomacroeconomic variables, the authors expect the volatility variable in the variance equation to be negative.
The variance equation, however, is expected to have anegative coefficient for volatility, partly explained bycounter-cyclicality, and, a positive leverage due to thepresence of volatility clustering in GDP, with the introduction of cash and non-cash remittances as explanatory variables. Volatility clustering is partly explainedby its positive effect on leverage, as long term trends in
GDP become dependent on past volatilities. Remittances,used to smoothen consumption, is also used as a leverage for durable goods expenditures, investments inhousing and other financial assets. Once households areable to accumulate enough savings from remittances,
they are able to siphon these funds to investments.
Objective 2: Effect of COVID-19 on Remittances
For the 2nd objective, however, the authors hypothesized that the COVID-19 will have a negative effect onremittances, due to the economic downturn of economies all over the world.

Results

The graph of remittances with current Gross
Domestic Product (GDP) shows a strong positive correlation between GDP and remittances. (see Figure 3) Infact, from 2000 to 2021, even if remittance flows
declined in some quarters, overseas Filipino workers(OFWs) were able to send more remittances in the succeeding quarters, enabling their families to cope with
unforeseen expenses during the pandemic.

168

A. Hypothesis 1: Remittances smoothen macroeconomic volatilities.
Nominal Gross Domestic Product (GDP). Table 2
shows the variance equation of GDP with and without
the presence of remittances. With only household final

Figure 3. GDP and Remittances (2000-2021)
Source: Philippine Statistics Authority and Bangko Sentral ng Pilipinas
Note: Personal Remittances (PERSREMIT) = Cash and non-cash
remittances

Table 2. GDP with and without Remittances6th AFC Best Papers (2022)

consumption expenditure (HFCE), government final
expenditure (GFCE), and gross capital formation (GKF)
as explanatory variables, volatility and leverage are notsignificant. When remittances are included as a regressor, volatility clustering is captured. Volatility is negative for non-cash remittances signifying that remittances
stabilize the inherent volatility of GDP (Chami, et al2012). Recipients of cash and non-cash remittances
seem to use remittances as a leverage, from the result ofa significant positive coefficient for the cash and noncash equations. This happens given a certain level ofGDP, and cash remittances are transferred through nonbank modes.
GDP Growth. The effect of dampening volatility isalso observed when GDP growth is regressed with theabove mentioned explanatory variables. This regression
shows the volatility dampening effect of remittances on
GDP. The presence of cash remittances increases theliquidity of households, especially in times of economic
crises. This can be observed from the significantly
smaller coefficient of household consumption and grosscapital formation when cash and non-cash remittances
are introduced. The variance equation also shows thathouseholds are able to cope with the vulnerability of theeconomy to external shocks such as oil price hikes andexchange rate movements. OFW family members seemto remit more cash when they expect economic downturns, thus allowing their family members in thePhilippines to cope with an impending economic crisis.
The counter-cyclicality of remittances to GDP growth
can be observed from the regression result due to negative and significant volatility and positive leverage.
Remittances on Household Final Consumption
Expenditures (HFCE). Table 4 shows the effects ofremittances on household final consumption expenditure (HFCE) as the dependent variable. Based on the
results, OFWs send their remittance early on. Similarly,
non-cash remittances both current and two periods backalso have positive effects on household final consumption expenditure. Both cash, sent during the 4th quarter,and non-cash remittances significantly contribute tohousehold consumption. Volatility is insignificant for
cash remittances but is positively moderately significant
for non-cash remittances signifying that remittances are
Table 4. Household Final Consumption
Expenditure with or without Remittances

Table 3. GDP Growth with & without Remittances

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Viory Yvonne Janeo T., et al.

more likely to be transacted through non-bank sources
during economic downturns. Recipients of non-cash
remittances seem to use it as a leverage, ie. asking their
OFW family members to delay sending when theexchange rate is not favorable, or, to use non-bank agencies, which charge a lower transaction fee.
Remittances on National Savings. Table 5 showsthe estimation output of the impact of cash remittances
to National Savings. The results show the negative relationship of cash remittances to national savings.
Intuitively, households have greater liquidity when theyreceive cash remittances. But households in an emerging economy like the Philippines do not have enoughcash to allocate into savings. Most households allocate
96% to 97% of their remittances to food and essential
household needs.
B. Hypothesis 2: Covid-19 has a negative impact onremittances
With the Covid-19 pandemic, it is expected that
remittances will decline from 2020 onwards. This will
Table 5. National Savings with or without Remittances

have a negative impact on the economy. The authors
looked into the quarterly Consumer Expectations
Survey (CES), which is a household-based survey on
consumers’ assessment of their family income, financial
situation, and the economic condition of the country
conducted by The Philippine Statistics Authority (PSA)
in collaboration with the Bangko Sentral ng Pilipinas(BSP), who analyses the results. The authors limited theanalysis on every 4th quarter for the past 5 years to see
how many OFW households respondents would allocate
their remittances towards the latter part of the year as
the holiday season approaches. For the past five 4th
quarters, the CES results show that Food and OtherHousehold Needs dominates the motivation of OFW
household consumption, followed by education, medical
expenses, and savings. Respondents on Consumption offood and other household needs have constantly
increased from Q4-2015 (95.9%) to Q4-2018 (98.5%)
and decreased slightly to 97.3% in Q4-2019.
Those who allocated their remittances on Education,on the other hand, have been fluctuating for the past 5
years, with the highest spending of 70.0% in Q4-2016,
and the lowest in Q4-2017 at 62.6%. OFW households
allocated less on Medical Expenses for the past 5 4thquarters starting at 59.7% in Q4-2015 and dropping to
44.6% in Q4-2019. Remittances for Savings peaked in
Q4-2016 by 46.8%, and has decreased to 42.3% in
Table 6. Remittances Utilization of OFW Households Prior
to COVID-19

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Q4-2017 and 35.5% in Q4-2018; but rising to 38.5% in
Q4-2019. Investments seem to be the last priority of
OFW households when it comes to spending. Purchaseof Car/Motor Vehicle surpassed it from Q4-2017 to
Q4-2019. Investment allocation peaked in Q4-2016 at
10.0%, and drastically declined to 5.9% in Q4-2017 and5.1% in Q4-2018 and Q4-2019.
The same trend was observed during the onset of thepandemic and the succeeding quarters. In terms of allocation for Food and Other Household Needs, the survey
revealed that food and other household expense still
dominates the motivation of OFW household consumption (which peaked in Q3-2020 at 97.2% albeit slowing
down to 96.0% in Q4-2021). Allocation on education,
medical expenses, and savings maintained their pre-pandemic ranking spot. It is noticeable that the allocation
for these items was higher during the first year of thepandemic, confirming the findings of the previous studies that during crisis, overseas workers tend to sendmore to help their family members and relatives cope up
with situation. Specifically, the allocation for medical

expense posted its highest in Q4-2020 since 2018, which
can be attributed to higher allocation of remittances tohealth-related spending to combat the COVID-19 virus.
In 2021, a general decline in allocation was observed but
more especially on the purchases of house and car/motor
vehicle declined towards the end of 2021. Allocation on
investment remained low, recording its Q1-2021 at 8.2%
and gradually declined in the last quarter of 2021 to
5.2%. (See Table 7)
The previous observation points out that economic
fluctuations impact how households allocate the remittances received. It was generally observed that households spend more during good times and spend less on
bad times to prioritize spending on essential needs.
Privara et al. (2021) said that during economic distress(whether perceived or real), households tend to savemore in order to cope. The regression result showed earlier on the effect of economic downturns on householdspending also points out that economic distresses will
necessarily result in household spending adjustment.

Table 7. Remittances Utilization of OFW Households During the COVID-19 Pandemic

Source: Consumer Expectations Survey. BSP

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C. Summary of Findings

Meanwhile, non-cash remittances or goods such as
money sent through pera padala or in-kind goods
through balikbayan boxes help them save money. Thisbehavior gives us a qualitative explanation of the counter-cyclicality of remittances. This means that OFWs
send more remittances, in cash or in kind, during economic downturns.

Conclusion

Gross Domestic Product (GDP) is heteroskedastic as
its variance takes on different behaviors. The authors
found this fact inevitable because the variance of GDPchanges according to economic situations, which have172

the tendency to not be captured by the equation. Withthe use of EGARCH, the authors were able to simulate
an equation for the variance to aid the problem of heteroskedasticity. Remittances have indeed proven that itcushions GDP, household spending, and national savings during economic downturns. Cash remittances
lessen volatility in GDP, while non-cash remittances
have a negative effect on GDP not necessarily because
they lower the GDP, but rather because they do not get
captured in the national income accounts right away as
they enter the country apart from banks. They tend to go
straight to households, through pera padala (which can
now be received through GCash free of charge) or6th AFC Best Papers (2022)

through in-kind remittances such as goods from balikbayan boxes. In effect, money sent through pera padalathat can be received through GCash saves time for thehouseholds because they no longer need to line up in
branches especially in times like the pandemic where it
is risky to go to public places.
In addition, the money they receive through online
wallet GCash need not be withdrawn and can be used todirectly pay for whatever they need. In line with theresults earlier, non-cash remittances is one of the avenues that help households save money. Cash remittances, on the other, hand, help smoothen household
consumption.
On the National Savings side, it is seen that, ironically,
cash remittances have a negative impact on savings. Thisis brought about by the fact that the Philippines is an
emerging economy. Households tend to utilize money inthe bank for necessities and hence the negative relationship. Contrary to this, it is shown that non-cash remittances do have a positive relationship with savings. Thisis because non-cash remittances act supplementary tohouseholds’ necessities. Households would not have tospend incrementally for food, clothing, or electronic
devices if non-cash remittances go by that form and consequently leaves their bank savings untouched. Moreover,
if non-cash remittances are sent in the form of spare cash
through expresses or through services such as electronic
funds transfer, households still tend to utilize their moneyin the bank leaving these non-cash remittances untouched
and, in effect, growth in savings.
Despite the challenges brought about by the pandemic, remittances remained resilient. Based on the
results from the model simulated for our first objective,
it showed that remittances actually cushion GDP, consumption, and national savings in hard times. Literature
also showed how Filipinos send more money in times of
distress to help households cope. With the closure of
economies last year, many OFWs got laid off, if not,were not able to go to work and earn money to send totheir families in the Philippines. Surprisingly, in July
2020, when economies started to open up once again,
remittances sent to the Philippines even surpassed theremittances sent during the same period in 2019. This

just proves how selfless Overseas Filipino Workers areespecially in times of distress as they would send moremoney to their families. This altruism also empirically
proves countercyclicality because an adverse shock(such as the pandemic) in the recipient country getscompensated by remittances.

Recommendations for Future ResearchThis study can be extended by using other explanatory variables (i.e., financial inclusion index (FII),
human development index (HDI) and doing a cross-sectional analysis, subject to data availability. A follow-up
study assessing the spending behavior of the family
members of OFWs can help further substantiate theresult of this study. Other researchers can also do a comparative analysis on the efficiency of non-cash remittances vs. cash remittances and their economic
implications.

References
1) Abdon, A., Alba, M., Garde, M., & Sugui, J. (2007). Overseas
Workers, Remittances, and Household Welfare in the Philippines.
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