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A Fantastic Rain of Gold: European Migrants' Remittances and Balance of Payments Adjustment During the Gold Standard Period

Published online by Cambridge University Press:  01 December 2009

Rui Esteves*
University Lecturer, Department of Economics and Brasenose College, University of Oxford, Oxford OX1 4AJ, United Kingdom; and CEMPRE. E-mail:
David Khoudour-Castéras*
Economist, CEPII, 9 rue Georges Pitard, 75740 Paris Cedex 15, France. E-mail:


While the pre-1914 mass migrations have been widely studied, the related pattern of emigrants' remittances is still largely untouched. This article aims at filling this gap by analyzing the contribution of remittances to financial stability. In the optimum currency area theory, labor mobility can ease the adjustment mechanism for countries under fixed exchange rate regimes. We confirm this claim by showing that emigrants' remittances reduced the incidence of financial disturbances among a sample of emerging economies characterized by substantial emigration. This result underscores the benefits for emerging economies from opening up to international factor flows, despite the associated financial turbulence.

“A fantastic rain of gold.” Thus observers in the decades between the nineteenth and the twentieth century described the influx of capital toward Italy generated by emigration remittances. These flows were spread piecemeal across the countryside of the entire peninsula, especially into the poorest regions of marginal mountain agriculture.1

Copyright © The Economic History Association 2009

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