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Do Remittances Facilitate a Sustainable Current Account?

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  • Gazi M. Hassan
  • Mark J. Holmes

Abstract

We examine how workers’ remittances impact on the current account. In doing so, we focus on how remittances affect the sustainability rather than size of current account balances. We find that the presence of remittances make it more likely that exports and imports are cointegrated thereby lending support to weak sustainability where increased remittances are associated with a faster speed of current account adjustment (lower persistence), particularly for those countries characterised by already highly persistent current account balances. We find that remittances are beneficial to the current account balance. This is in contrast to a literature that emphasises an adverse Dutch disease impact of workers’ remittances on the real exchange rate in terms of reduced external competitiveness.
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  • Gazi M. Hassan & Mark J. Holmes, 2016. "Do Remittances Facilitate a Sustainable Current Account?," The World Economy, Wiley Blackwell, vol. 39(11), pages 1834-1853, November.
    • Handle: RePEc:bla:worlde:v:39:y:2016:i:11:p:1834-1853
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    2. Dramane Coulibaly & Blaise Gnimassoun, 2022. "Emigration and Capital Flows: Do Migrants’ Skills Matter?," Working Papers of BETA 2022-31, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    3. Coulibaly, Dramane & Gnimassoun, Blaise & Mignon, Valérie, 2020. "The tale of two international phenomena: Migration and global imbalances," Journal of Macroeconomics, Elsevier, vol. 66(C).
    4. Sahoo, Manoranjan & Nayak, Pragyan Parimita & Hanhaga, Manindra & Swain, Kiranbala & Mallick, Rajat Kumar, 2023. "Exploring the asymmetric effect of remittance inflows on gold import demand: Evidence from a large gold-consuming and remittance-receiving country," Resources Policy, Elsevier, vol. 85(PB).
    5. Orsolya Csortos & Balázs Kóczián, 2017. "An Analysis of the Incomes and Current Personal Transfers of Hungarians Living Abroad," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 16(2), pages 5-27.

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    JEL classification:

    • F0 - International Economics - - General
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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