How Do Remittances Affect The Real Exchange Rate An Empirical Investigation
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How Do Remittances Affect The Real Exchange Rate An Empirical Investigation
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Author : Ms. Alina Carare
language : en
Publisher: International Monetary Fund
Release Date : 2025-06-20
How Do Remittances Affect The Real Exchange Rate An Empirical Investigation written by Ms. Alina Carare and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2025-06-20 with categories.
Growing remittance flows to emerging and developing economies may lead to real exchange rate appreciation and weaken their competitiveness. While the empirical literature finds mixed results about the relevance of this relationship, it does not delve into understanding the interplay of two crucial elements for policymakers—the exchange rate regime and the structure of the economy. Filling this gap in the literature, our paper examines how exchange rate regimes and the structure of the economy affect the impact of remittance flows on the real effective exchange rate (REER). Using data from a large sample of economies over 2008-21, we arrive at three key findings. First, REER overvaluation correlates positively with remittance flows under flexible exchange rate regimes. Once controlling for potential endogeneity in a dynamic panel and other variables determining exchange rate behavior, we find that countries with fixed exchange rate regimes also experience appreciation, albeit smaller and slower relative to countries under flexible regimes. Second, we find relatively larger REER appreciation effects for countries that have import-to-GDP ratios lower than the world median, and countries with remittances-to-GDP ratios higher than the world median. Third, for countries that receive relatively high remittances and import relatively less, the REER appreciates after a remittance shock, regardless of the exchange rate regime. The results are robust to alternative classifications, data sources, specifications and sample size.
Macroeconomic Consequences Of Remittances
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Author : Connel Fullenkamp
language : en
Publisher: International Monetary Fund
Release Date : 2008-03-11
Macroeconomic Consequences Of Remittances written by Connel Fullenkamp and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008-03-11 with Business & Economics categories.
Given the large size of aggregate remittance flows (billions of dollars annually), they should be expected to have significant macroeconomic effects on the economies that receive them. This paper directly addresses the two main issues of interest to policymakers with regard to remittances--how to manage their macroeconomic effects, and how to harness their development potential--by reporting the results of the first global study of the comprehensive macroeconomic effects of remittances on recipient economies. In broad terms, the findings of this paper tend to confirm the main benefit cited in the microeconomic literature: remittances improve households' welfare by lifting families out of poverty and insuring them against income shocks. The findings also yield a number of important caveats and policy considerations, however, that have largely been overlooked. The main challenge for policymakers in countries that receive significant flows of remittances is to design policies that promote remittances and increase their benefits while mitigating adverse side effects. Getting these policy prescriptions correct early on is imperative. Globalization and the aging of developed economy populations will ensure that demand for migrant workers remains robust for years to come. Hence, the volume of remittances likely will continue to grow, and with it, the challenge of unlocking the maximum societal benefit from these transfers.
Workers Remittances And The Equilibrium Real Exchange Rate
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Author : Mr.Adolfo Barajas
language : en
Publisher: International Monetary Fund
Release Date : 2010-12-01
Workers Remittances And The Equilibrium Real Exchange Rate written by Mr.Adolfo Barajas and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-12-01 with Business & Economics categories.
This paper investigates the impact of workers’ remittances on equilibrium real exchange rates (ERER) in recipient economies. Using a small open economy model, it shows that standard "Dutch Disease" results of appreciation are substantially weakened or even overturned depending on: degree of openness; factor mobility between domestic sectors; counter cyclicality of remittances; the share of consumption in tradables; and the sensitivity of a country’s risk premium to remittance flows. Panel cointegration techniques on a large set of countries provide support for these analytical results, and show that ERER appreciation in response to sustained remittance flows tends to be quantitatively small.
Determinants Of Remittances
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Author : Ms.Huidan Huidan Lin
language : en
Publisher: International Monetary Fund
Release Date : 2011-01-01
Determinants Of Remittances written by Ms.Huidan Huidan Lin and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-01-01 with Business & Economics categories.
This paper analyzes the determinants of remittances to Tonga. The results indicate that macroeconomic conditions in remitting countries and exchange rate fluctuations influence remittances. In particular, remittances growth falls when the Tongan currency appreciates, but increases with higher real GDP growth and lower unemployment in remitting countries. The analysis also finds that the influence of these determinants varies with the recipients of remittances, with remittances to non-profit organizations being more sensitive to an appreciation of the Tongan currency and the interest rate differential between Tonga and remitting countries than remittances to households. However, the analysis does not find evidence of "?Dutch Disease" in Tonga, as the real exchange rate does not appear to be affected by remittances.
Handbook Of Small States
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Author : Lino Briguglio
language : en
Publisher: Routledge
Release Date : 2018-05-11
Handbook Of Small States written by Lino Briguglio and has been published by Routledge this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-05-11 with Political Science categories.
This handbook covers a wide spectrum of issues relating to small states. Chapters in the volume have been grouped under the three main themes of economic, social and environmental issues. The economics sections include chapters dealing with trade, finance and regulatory frameworks, while the social theme covers health, migration, population ageing, as well as overall social wellbeing. The environmental theme examines matters such as measuring environmental performance, natural disasters, the ocean economy, and the validity of the Sustainable Development Goals. One major issue is the definition of small states. As this volume demonstrates, generally speaking, population is used to measure country size in the literature. However, it clearly emerges that there is no real consensus as to the population cut-off point that distinguishes small states from large ones. While the approaches taken by the authors vary, in all cases the chapters draw practical policy implications for small states. The book can therefore be considered as a wide-ranging depositary of information on small states with the aim of deriving policy prescriptions, and thus as an excellent resource for academics, students and policymakers.
Determinants And Macroeconomic Impact Of Remittances In Sub Saharan Africa
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Author : Kyung-woo Lee
language : en
Publisher: International Monetary Fund
Release Date : 2009-10-01
Determinants And Macroeconomic Impact Of Remittances In Sub Saharan Africa written by Kyung-woo Lee and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009-10-01 with Business & Economics categories.
The paper investigates the determinants and the macroeconomic role of remittances in sub-Saharan Africa, assembling the most comprehensive dataset available so far on remittances in the region and incorporating data on the diaspora. It finds that remittances are larger for countries with a larger diaspora or when the diaspora is located in wealthier countries, and that they behave countercyclically, consistent with a role as a shock absorber. Although the effect of remittances in growth regressions is negative, countries with well functioning domestic institutions seem nevertheless to be better at unlocking the potential for remittances to contribute to faster economic growth.
Migration And Remittances In Latin America And The Caribbean
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Author : Ms.Kimberly Beaton
language : en
Publisher: International Monetary Fund
Release Date : 2017-06-30
Migration And Remittances In Latin America And The Caribbean written by Ms.Kimberly Beaton and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-06-30 with Business & Economics categories.
Outward migration has been an important phenomenon for countries in Latin American and the Caribbean (LAC), particularly those in Central America and the Caribbean. This paper examines recent trends in outward migration from and remittances to LAC, as well as their costs and benefits. For the home country, the negative impact from emigration on labor resources and productivity seems to outweigh growth gains from remittances, notably for the Caribbean. However, given emigration, remittance flows play key financing and stabilizing roles in Central America and the Caribbean. They facilitate private consumption smoothing, support financial sector stability and fiscal revenues, and help reduce poverty and inequality, without strong evidence for harmful competitiveness effects through shifts in the real exchange rate.
Capital Flows Exchange Rate Flexibility And The Real Exchange Rate
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Author : Mr.Tidiane Kinda
language : en
Publisher: International Monetary Fund
Release Date : 2011-01-01
Capital Flows Exchange Rate Flexibility And The Real Exchange Rate written by Mr.Tidiane Kinda and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-01-01 with Business & Economics categories.
This paper analyzes the impact of capital inflows and exchange rate flexibility on the real exchange rate in developing countries based on panel cointegration techniques. The results show that public and private flows are associated with a real exchange rate appreciation. Among private flows, portfolio investment has the highest appreciation effect-almost seven times that of foreign direct investment or bank loans-and private transfers have the lowest effect. Using a de facto measure of exchange rate flexibility, we find that a more flexible exchange rate helps to dampen appreciation of the real exchange rate stemming from capital inflows.
Do Workers Remittances Reduce The Probability Of Current Account Reversals
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Author : Matteo Bugamelli
language : en
Publisher: World Bank Publications
Release Date : 2005
Do Workers Remittances Reduce The Probability Of Current Account Reversals written by Matteo Bugamelli and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005 with Balance of payments categories.
The authors combine the literature on financial crises in emerging markets and developing economies with that on international migrations by investigating whether the increasingly large flows of workers' remittances can help reduce the probability of current account reversals. The rationale for this stands in the great stability and low cyclicality of remittances as compared with other private capital flows: these properties, combined with the fact that remittances are cheap inflows of foreign currencies, might reduce the probability that foreign investors suddenly flee out of emerging markets and developing economies and trigger a dramatic current account adjustment. The authors find that remittances can have such a beneficial effect. In particular, they show that a high level of remittances, as a ratio of GDP, makes the relationship between a decreasing stock of international reserves (over GDP) and a higher probability of current account crises less stringent. The same occurs, though less neatly, for the positive relationship between an increasing stock of external debt (over GDP) and the probability of current account reversals. The results point also to a threshold effect of remittances: the mechanisms just described are, in fact, much stronger when remittances are above 3 percent of GDP.
International Remittance Payments And The Global Economy
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Author : Bharati Basu
language : en
Publisher: Routledge
Release Date : 2014-08-07
International Remittance Payments And The Global Economy written by Bharati Basu and has been published by Routledge this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-08-07 with Business & Economics categories.
International Remittance Payments are described mainly as money sent by immigrants to their families and friends in their home countries. These payments provide an important source of income that is mostly used to provide for a variety of basic needs of the non-migrating members of immigrant families and thus remittance payments can be considered as a tool to reduce the poverty level of the labor sending countries. However, remittances are also used for asset accumulation by some families and for some countries they constitute a good part of foreign funds coming into the country. In-spite of their increasing volume over the last few decades, a lot of things about remittances are not known and studies estimate that about half of these money transfers are not even recorded. Since these payments are shown to reduce poverty and help economic progress in the remittance receiving countries, a better knowledge about remittances would help the debates surrounding immigration, remittances and their relation to the global economy. This book provides an overview of remittances in different parts of the world over the last thirty years. It looks at the labor sending and labor receiving countries separately. The text examines the trends, uses, motivations behind sending remittances, cost of sending them and how they are affected by the nature and the development level of different institutional factors. The remittance flows are growing over time and they are used mostly for reducing the uncertainty of life in the less developed parts of the world. However, motivation for sending remittances could be improved and thus remittances could be more conducive to economic development if 1) the relation between the remittance decision and the migration decision is better understood and 2) the costs of international money transfers are reduced. More studies about those issues would benefit the international community. Efforts should be made in all fronts to encourage such international flow of funds not only to have a redistribution of income all over the world, but also to synchronize the efforts towards global economic development and a better integration of the world economy. This book is aimed researchers, policy practitioners and post graduates studying International Economics or International Economic Relations or Political Science or Economic Development.