Remittances and structural breaks: A time series analysis using chaos theory BDS test

This paper analyzes remittance inflows using a recursive implementation of the BDS test, a nonlinear-dynamics procedure traditionally used to assess whether a time series is generated by an independent and identically distributed process. We adapt the test to detect structural breaks in global remittances and in the five largest recipient countries—India, Mexico, the Philippines, Pakistan, and Bangladesh—without imposing a specific data-generating model. The procedure repeatedly applies the BDS test to an initial subsample and expands the estimation window one observation at a time. Pronounced shifts in the recursively computed statistic indicate changes in the underlying generating mechanism. We use annual remittance data for 1970–2024 and examine regime transitions associated with financial crises, pandemics, changes in capital-absorption capacity, technological innovation, and policy shifts. The results identify robust global structural changes in 1993, 2009, and 2015, with heterogeneous timing across recipient countries. Sensitivity checks support the stability of the principal break dates. The findings show that remittance dynamics are not adequately represented by a single time-invariant regime. Estimating separate models for detected regimes can improve the accuracy, interpretation, and policy relevance of subsequent analysis.