This study attempts to explore the effect of remittances on output volatility (Business Cycle) for a large panel of developing countries. The empirical analysis is based on a panel of 54 countries over the period of 1990-2015. For the estimation of dynamic panel data model generalized method of moments (GMM) technique has applied. The findings of the sample of developing countries confirm that foreign worker remittance has statistically significant negative effect on business cycle volatility, which indicate that inflow of remittances in developing countries smooth business cycle fluctuation and brings economic stability. The coefficient of remittances shows that a one percent increase in remittances will decrease business cycle volatility by 0.01805 percent. This study suggests that government should encourage the inflow of remittances by establishing currency units in different places, where the household could receive their due amount. Supervisor:- Dr. Karim Khan