Impact of political instability periods on Lebanese expatriates remittances to Lebanon

Abstract

Purpose – With the growing importance accorded to the subject of Lebanese Emigration, many studies have discussed the impact of the emigrants' contributions to Lebanon on the social and economic levels, notably remittances. Fewer studies have discussed the effect of political instability factors on the flow of these remittances; therefore this thesis will study the impact of several political risk components on expatriates remittances to Lebanon between 1985 and 2016 while taking into consideration other factors in Lebanon and in a host country like deposit interest rate and growth rate. Design/methodology/approach – This study uses two multivariate techniques. First, it used a Factor analysis in order to group the 12 ICRG indicators of political risk into fewer factors and eliminate the effect of multicollinearity. Once done, multiple linear regressions were done to study the effect of political instability on remittances in addition to considering economic conditions in Lebanon and another host country. Findings – The major finding of this research paper is that, unlike what most of people believe, Lebanese expatriates have shown more willingness to send remittances to Lebanon during times of conflict and instability. Research limitations – The main limitation of this study is the limited time period it covers, since it is only studying the period going from 1985 to 2016 and this is mainly to the unviability of sufficient data for Lebanon. In addition, when studying the effect of instability while taking into account economic factors in other countries, the study was limited to Canada for data availability issues. Practical implications –- Financial institutions can benefit from the findings of the research paper especially during times of crisis and conflict to develop channels to facilitate the fund transfers and benefit from it. Originality/value – While many studies focused on emigration in general, the role remittances play in supporting local economies and during or after periods of instability, this study focuses on the impact of the political instability on remittances sent by Lebanese. This is the first study in Lebanon that tackles this particular subject.