Hidden Foreign Exchange Flows: Estimating Unofficial Remittances to Tonga and Western Samoa

Abstract

This article shows how sample survey data from both the remitting and receiving ends can be used to derive estimates of total remittances by migrants from Tonga and Western Samoa, including those sent through unofficial channels. Such survey data can provide a wealth of information on the variety of forms and channels of remittances used by migrants, from which it is possible to assess the quantitative and qualitative significance of these hidden international resource flows. Unrecorded remittances are found to constitute a highly significant part of total remittances to these Pacific island countries. It is argued that current account estimates from official balance of payments data in these situations need to be treated with extreme caution, especially in the context of macroeconomic analysis and policy formulation.