A nexus between remittances and uncertainty in Zimbabwe

Zimbabwe is a remittance-dependent society and uncertainty has become a constrain driver to the inflows of remittances due to the overhanging institutional trust. Domestic inflation and natural disasters in Zimbabwe, as well as global shocks such as COVID-19 and the Russia-Ukraine war, have escalated economic instability which adversely impact on remittance flow into Zimbabwe. The study's objective is to establish the effects of uncertainty on remittances in Zimbabwe using data for 2000–2019. The study employed the ARDL bounds and GARCH model. The ARDL results show a long-run relationship between remittances and uncertainty with high speed of adjustment 85.1%, which is an indication that the diaspora-home country link is very responsive to equilibrium rates. Uncertainty demonstrates a negative coefficient (− 8.77) in the short run and − 2.93 in long run, indicating that extreme policy uncertainty generate distrust and remitters hold up transfers or move towards informal channels. Yet inflation is an altruistic pull factor that leads home-bound migrant's to raise the level of their remittances in order to maintain their families' purchasing power. The GARCH results shows that the volatility of remittance is persistent indicating that internal policy impulse continues to give rise to destabilizing effects over more than one period. Zimbabwe’s remittance-uncertainty nexus indicate that inflation and broad economic instability are contributing factors in the overall factors that affect remittances inflow because, as economic instability grows, remittances suffer from risk aversion leading to a decline in formal inflows whereas rising inflation increases altruistic surges towards perpetuating household consumption. The persistent nature of remittance volatility -GARCH findings implies that exchange rate depreciation could lead to long-run negative effects for the level of national liquidity as internal policy intervention appears to create a lasting disruption.