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Workers´ Remittances and the Equilibrium Real Exchange Rate: Theory and Evidence

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  • Adolfo Barajas

    ()

  • Ralph Chami

    ()

  • Dalia Hakura

    ()

  • Peter Montiel

    ()

Abstract

"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, and countercyclicality 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."

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Bibliographic Info

Article provided by LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION in its journal JOURNAL OF LACEA ECONOMIA.

Volume (Year): (2011)
Issue (Month): ()
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Handle: RePEc:col:000425:008449

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Keywords: Worker´s remittances; equilibrium real exchange rate; low-income countries;

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References

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  14. Pablo A. Acosta & Emmanuel K.K. Lartey & Federico S. Mandelman, 2007. "Remittances and the Dutch disease," Working Paper, Federal Reserve Bank of Atlanta 2007-08, Federal Reserve Bank of Atlanta.
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Cited by:
  1. Abdih, Yasser & Chami, Ralph & Dagher, Jihad & Montiel, Peter, 2012. "Remittances and Institutions: Are Remittances a Curse?," World Development, Elsevier, Elsevier, vol. 40(4), pages 657-666.
  2. Peter J. Montiel & Luis Servén, 2008. "Real Exchange Rates, Saving and Growth: Is there a Link?," Department of Economics Working Papers, Department of Economics, Williams College 2010-18, Department of Economics, Williams College.
  3. Gianmarco I. P. Ottaviano & Giovanni Peri & Greg C. Wright, 2013. "Immigration, Offshoring, and American Jobs," American Economic Review, American Economic Association, American Economic Association, vol. 103(5), pages 1925-59, August.
  4. Nuru Giritli & Sevin Ugural, 2012. "A custom made CGE Model for an isolated, politically non-recognized small island economy: Exogenous income shock to the North Cyprus Economy," EcoMod2012, EcoMod 4282, EcoMod.
  5. Christian Ebeke & Thierry Yogo Urbain, 2013. "Working Paper 185 - Remittances and the Voter Turnout in Sub-Saharan Africa: Evidence from Macro and Micro Level Data," Working Paper Series, African Development Bank 989, African Development Bank.
  6. Abida Zouheir & Imen Mohamed Sghaier, 2014. "Remittances, Financial Development and Economic Growth: The Case of North African Countries," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 17(51), pages 137-170, March.

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