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Back to Basics: Remittances in the Keynesian Macroeconomic Framework

Author

Listed:
  • Daren Conrad

    (The University of the West Indies)

  • Benjamin Ramkissoon

    (The University of the West Indies)

  • Sara Mohammed

    (The University of the West Indies)

Abstract

This paper examines a remittance multiplier based on the short-run Keynesian equilibrium approach and shows how income may be affected by remittance inflows. We explore this through the equilibrium in the goods and money markets, where remittances can affect both consumption and the demand for real money balances. We present this simple theoretical model utilizing a standard Keynesian framework. The short-run Keynesian equilibrium approach provides insight into how remittances affect output and income, and its potential multiplier effects. The model used is indicative of a positive relationship between the marginal propensity to consume out of remittances and the multiplier. The framework also shows that remittances will have a greater impact if its marginal propensity to consume is greater than that for standard disposable income.

Suggested Citation

  • Daren Conrad & Benjamin Ramkissoon & Sara Mohammed, 2018. "Back to Basics: Remittances in the Keynesian Macroeconomic Framework," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 24(3), pages 233-238, August.
    • Handle: RePEc:kap:iaecre:v:24:y:2018:i:3:d:10.1007_s11294-018-9703-y
    DOI: 10.1007/s11294-018-9703-y
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Remittances; IS-LM model; Keynesian equilibrium; National income;
    All these keywords.

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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